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CMA Publication No - 239

Organic Input Production and Marketing in


India Efficiency, Issues and Policies

D.Kumara Charyulu
Subho Biswas

September 2010

Foreword
The Centre for Management in Agriculture (CMA) at the Indian Institute of
Management, Ahmedabad (IIMA) is engaged in applied and problem solving
research in agribusiness management as well as achieving broader goals of
agricultural and rural development since its inception. As a result, over the years,
CMA has developed an expertise in a large spectrum of issues in agribusiness
sector including agri-input marketing, agro-processing, agri-food marketing,
livestock, fisheries, forestry, rural and market infrastructure, agri-biotech sector,
grass-root innovations, linking smallholder producers to emerging markets,
international agricultural trade including the WTO issues, global competitiveness,
commodity markets, food safety and quality issues, etc. CMA undertakes research
projects of this kind not only on its own, but also at the request of its clientele group,
which includes the Ministry of Agriculture, Government of India, other state and
central government Ministries, international bodies, private corporations,
cooperatives and NGOs.
The present study is undertaken at the request of the Ministry of Agriculture to know
the present status of the organic input units sanctioned under National Project on
Organic Farming (NPOF) scheme since October, 2004. The project has different
components like training programs, demonstrations, capacity building through
service providers, setting up of organic input production units etc. Setting up of
organic input units is an important component with a sizeable allocation under the
project. For setting up of organic input production units, financial assistance is being
provided as credit-linked and back-ended subsidy through NABARD and NCDC.
Three types of organic input units i.e., vermi-hatchery units, bio-fertilizer units and
fruit and vegetable waste compost units are being encouraged under the project.
Broadly, the present study has covered five major issues. First, the study has
presented an overview of organic farming in the World and in India. The SWOT
analysis of organic farming to articulate, refine policy prospective and scheme has
been reviewed. Second, the study has lucidly summarized the status of input
production in India. Third, the study has also analyzed the capacity utilization and
efficiency of organic input units under NPOF scheme and their determinants. Four,
the study highlighted problems in procurement and usage of organic inputs by endusers in the study area. Five, study has presented a fairly comprehensive picture of
economics and efficiency of organic farming vis--vis conventional farming systems
in India. The study provided valuable insights for undertaking appropriate measures
for expansion of organic farming in the country.
I hope that findings of this study would be helpful for Ministry of Agriculture for
possible modifications and effective implementation of the scheme as well as to
organic producers and other stakeholders in organic produce supply chains in the
country.

Ahmedabad
Date:

Vijay Paul Sharma


Chairman
Centre for Management in Agriculture

Preface
GREEN revolution technologies involving greater use of synthetic agrochemicals
such as fertilizers and pesticides with adoption of nutrient-responsive, high-yielding
varieties of crops have boosted the production output per hectare in most cases.
However, this increase in production has slowed down and in some cases there are
indications of decline in productivity and production. Moreover, the success of
industrial agriculture and the green revolution in recent decades has often masked
significant externalities, affecting natural resources and human health as well as
agriculture itself. Environmental and health problems associated with agriculture
have been increasingly well documented, but it is only recently that the scale of the
costs has attracted the attention of planners and scientists. Increasing
consciousness about conservation of environment as well as of health hazards
caused by agrochemicals has brought a major shift in consumer preference towards
food quality, particularly in the developed countries. Global consumers are
increasingly looking forward to organic food that is considered safe and hazard-free.
Global demand for organic products remains robust, with sales increasing by over
five billion US Dollars a year. According to the Organic Monitor, international sales
estimates have reached 38.6 billion US Dollars in 2006; double that of 2000, when
sales were at 18 billion US Dollars.

India is bestowed with lot of potential to produce all varieties of organic products due
to its agro-climatic regions. In several parts of the country, the inherited tradition of
organic farming is an added advantage. This holds promise for the organic
producers to tap the market which is growing steadily in the domestic market related
to the export market. The important events in the history of the modern nascent
organic farming in India were unveiling of the National Programme for Organic
Production (NPOP) in 2000 and National Project on Organic Farming (NPOF) in
2004. The NPOF scheme has components like capacity building through service
providers; financial support to different production units engaged in production of biofertilizers, fruit and vegetable waste compost and vermi-hatchery units and human
resource development through training on certification and inspection, production
technology etc. The establishment of production units under this scheme is being
provided as credit-linked and back-ended subsidy by NABARD and NCDC. Around
455 vermi-hatchery units, 31 bio-fertilizer units and 10 fruit and vegetable waste units
were sanctioned across different states by NABARD till May, 2009. But, NCDC has
so far sanctioned only two bio-fertilizer units in Maharashtra state. At this juncture, it
is very interesting to know what the present status of these units, what the
production and capacity utilization of each unit and suggestions for enhancing
capacity utilization etc. The present study revolves around the following issues:
What is the capacity utilization and efficiency of organic input units sanctioned
under NPOF scheme?
What are the constraints in establishment of units and identification of
problems in marketing of organic inputs?

What are the constraints in procuring and using organic inputs by the
farmers?
What are the suggestions for effective implementation of project?
Chapter 2 of the report reviews the status of organic farming in the World and India,
SWOT analysis of organic farming and briefly summarizes the government policies
in India. Chapter 3 gives the present status of organic input production in India. In
Chapter 4, brief review, analytical framework and specification of DEA model are
presented. Empirical results including productivity and efficiency of sample units are
examined. Costs and returns of vermi-compost production across different states
and regions are compared. Problems in establishment of units and constraints in
production are discussed. Finally, suggestions for promoting of organic input
production units are discussed.
In Chapter 5, presents the eight cases on three types of organic input units. Chapter
6 highlights the different marketing channels exists for marketing of organic inputs in
the study area. The problems in procurement and usage of organic inputs are
discussed. Chapter 7 analyzes the economics and efficiency of organic farming vis-vis conventional farming in different states of India.
Finally, the summary and conclusions of the study and policy implications are
summarized in Chapter 8. The average capacity utilization of vermi-hatchery units
was only 50.8 per cent which indicates nearly half of its full potential. The estimated
mean technical, allocative and economic efficiencies of sample units were low.
Strengthening of both input and output marketing channels is the need of the hour
for rapid expansion of organic farming in the country.

D.Kumara Charyulu
Subho Biswas

Contents
Foreword
Preface
Acknowledgements
List of Abbreviations
List of tables
List of graphs/figures

Chapter 1 Introduction
1.1 Sustainability development
1.2 Need for sustainable farming system
1.3 Scope of the study
1.4 Plan of the study

Chapter 2 An overview of organic farming


2.1 Status of organic farming in the world
2.2 Status of organic farming in India
2.3 SWOT analysis of organic farming
2.4 Underlying issues and conceptual framework
2.5 Government policies for development of organic farming in India

Chapter 3 Status of organic input production in India


3.1 Need for quality organic input
3.2 Capital incentive subsidy scheme for promotion of organic inputs
3.3 Status of organic input production

Chapter 4 Productivity and Efficiency of organic input units in India


4.1 Analytical framework
4.2 Brief review of literature
4.3 Specification of model
4.4 Sampling strategy
4.5 Empirical Results

Page no
1
1
3
11
11
13
18
23
25
57
59
79
79
80
84
95
95
97
106
110
112

Chapter 5 Cases on organic input units

142

Chapter 6 Marketing of organic inputs in India

187
188
191
196

6.1Channels for marketing of organic inputs


6.2 Problems in procurement and usage of organic inputs
6.3 Issues in marketing of organic inputs

Chapter 7 Economics and Efficiency of organic farming in India


7.1 Economics of organic farming vis--vis conventional farming
7.2 Efficiency of organic farming in India
7.3 Factors influencing efficiency in organic crops
7.4 Suggestion for expansion of organic farming

Chapter 8 Summary and conclusions


8.1 Main findings and conclusions
8.2 Policy Implications
Bibliography
Appendix

197
200
212
226
228
231
234
241
244
i -iv

Acknowledgements
Several individuals and organizations have helped us immensely during completion
of this study. Acknowledging each and every individual would be impossible but we
would amiss if we dont mention few individuals and organizations without whose
support and help it would have been difficult for us to complete this study. First and
foremost we would like to thank Ministry of Agriculture, Government of India, for their
generous financial support for this study.
Our special thanks to Centre for Management of Agriculture (CMA), Indian Institute
of Management (IIM), Ahmedabad for giving us this opportunity. We are highly
thankful to Prof. Vijay Paul Sharma, Chairman of CMA for his constant
encouragement and support in conduct of this study. We express our profound
sense of gratitude to Prof. Samar K Datta for his valuable guidance and constructive
criticism during the study period. We highly appreciate the suggestions and guidance
given by Prof Sukhpal Singh in the study design and conduct of field surveys. We
humbly place on records our respect to Prof Vasant P Gandhi for his valuable
suggestions in bringing out this report.
Finally but very importantly, our list of thanks and acknowledgements for their help in
producing this manuscript is a long one. We are very grateful to The National Bank
for Agriculture and Rural Development (NABARD), Mumbai and National
Cooperative Development Council (NCDC), New Delhi who have helped us in
providing the necessary information and data about NPOF scheme. We are thankful
to the National Centre for Organic Farming (NCOF), Ghaziabad for providing the
technical details, guidelines and manuals of schemes and various publications. We
highly appreciate the support provided by NABARD Regional offices, DDMs of all the
study districts, NCDC Regional office, Pune and Managers of various financial banks
and Cooperatives during our field visits in the four states. Our heartfelt thanks to
Hasmukh Patel, GM Agrocel Industrial Ltd, Gujarat; Mahajan Ji, Warana Bazaar in
Maharashtra; Umendra Dutt, Kheti Virasat Misson, Punjab and Sri Krishna Ji, Lok
Bharathi, Ahmednagar, U.P for their painstaking support in introducing us to various
organic farmers. We are thankful to IEG, New Delhi for their comments and
suggestions on the earlier version of this report. The authors are also extremely
grateful to Dr.K.P.C Rao, Principal Scientist (ICRISAT), Prof S.R Asokan, IRMA and
Prof P. Venugopal, XLRI for kindly going through an earlier draft of this manuscript
and providing valuable inputs. Our sincere thanks are also to A.K Vasisht, Asst.
Director General (ESM/PIM) for providing his expert comments on this report. We
sincerely acknowledge the help rendered by the staff members of CMA office, IIM, A
for their utmost help and cooperation during the preparation of this report. Last but
not the least, we owe to all the promoters of the units and farmers for their patience
answering, hospitality and sparing their valuable time with us.

D.Kumara Charyulu
Subho Biswas

List of Abbreviations
AE: Allocative Efficiency
AICRPPR: All India Coordinated Research Project on Pesticide Residues
AME: Agriculture, Man and Ecology
APEDA: Agricultural and Processed Food Products Export Development Authority
AQIS: Australian Quarantine and Inspection Service
ARISE: Agricultural Renewal in India for Sustainable Environment
BNF: Biological Nitrogen Fixation
CE: Cost Efficiency
CF: Conventional Farming
COP: Cost of Production
CRS: Constant Returns to Scale
DEA: Data Envelopment Analysis
DMU: Decision Making Unit
DRS: Decreasing Returns to Scale
EE: Economic Efficiency
EIA: Export Inspection Agencies
EIC: Export Inspection Council of India
ETL: Economic Threshold Level
FAO: Food and Agriculture Organization
FCO: Fertilizer Control Order
FiBL: Research Institute of Organic Agriculture, Switzerland
FST: Farming Systems Trial
FTDR: Foreign Trade Development and Regulation
FYM: Farm Yard Manure
GCA: Gross Cropped Area
GDP: Gross Domestic Production
GGC: Grower Group Certification
GHG: Green House Gases
GM: Genetically Modified
Ha: Hectare
HYV: High Yielding Varieties
ICCOA: International Competence Centre for Organic Agriculture
ICRISAT: International Crops Research Institute for the Semi-Arid Tropics
IFFCO: Indian Farmers Fertilizer Cooperative Limited
IFOAM: The International Federation of Organic Agriculture Movements
IIRD: Institute for Integrated Rural Development
ILEIA: Centre for learning on sustainable agriculture
INF: Industrial Nitrogen Fixation
INM: Integrated Nutrient Management
IOAS: International Organic Accreditation Services
IPCC: Intergovernmental Panel on Climate Change
IPM: Integrated Pest Management
IPNM: Integrated Plant Nutrient Management
IRS: Increasing Returns to Scale
JMC: Joint Monitoring Committee
Kg: Kilo-gram
KVK: Krishi Vigyan Kendra

LCA: Life-Cycle Assessment


MRL: Maximum Residual Level
MT: Metric Ton
NABARD: The National Bank for Agriculture and Rural Development
NCDC: National Cooperative Development Corporation
NCOF: National Center of Organic Farming
NCRB: National Crime Records Bureau
NGO: Non-Governmental Organizations
NHM: National Horticultural Mission
NOP: National Organic Program
NPOF: National Project on Organic Farming
NPOP: National Programme for Organic Production
NSSO: National Sampling Survey Organization
OCIA: Organic Crop Improvement Association
OF: Organic Farming
PGS: Participatory Guarantee System
Qtl: Quintal
RCOF: Regional Centre of Organic Farming
RRB: Regional Rural Banks
SAT: Semi-Arid Tropics
SCARDB: State Co-operative Agricultural and Rural Development Banks
SCB: State Cooperative Banks
SFA: Stochastic Frontier Analysis
SWOT: Strengths, Weaknesses, Opportunities and Threats
TE: Technical Efficiency
TFO: Total Financial Outlay
TGR: Technology Gap Ratio
TPA: Tons Per Annum
TPD: Tons Per Day
UKROFS: United Kingdom Register of Organic Food Standards
USDA: United States Department of Agriculture
USP: Unique Selling Proposition
VAT: Value Added Tax
VRS: Variable Returns to Scale
WCED: World Commission on Environment and Development
WHC: Water Holding Capacity
WHO: World Health Organization

List of tables

Table no.

Title

Page no.

1.1

Benefits of organic farming

10

2.1

Countries with number of certification bodies

20

2.2

Organic agricultural area and farms in Asia, 2006

21

2.3

Organic food production in India, 2007-08

24

2.4

Commodity wise organic food exports, 2007-08

24

2.5

Summary of SWOT analysis on organic farming

26

2.6

Pesticides residues in different market samples

28

2.7

Crops for which comparative advantage in production

29

2.8

Differences in nutritional status between organic and nonorganic produce

31

2.9

Mean values of soil properties

32

2.10

Regional nutrient balance scenario of conventional and organic


farming

33

2.11

Environmental impact scenario comparing organic vis--vis


conventional farming

35

2.12

Average yields of organic crops

38

2.13

Market potential for organic foods

45

2.14

Commodity wise potential for organic production in rain fed


regions

47

2.15

Food and fertilizer subsidies in India, 1990-91 to 2008-09

49

2.16

Nitrate leaching rates per hectare

50

2.17

Annual expenses for inspection and certification (eg. Ecocert)

53

2.18

List of accredited certification bodies under NPOP

54

2.19

Field performance of transgenic crops

56

2.20

Promotional activities taken up under NPOF

68

2.21

Total area under organic certification process during the year


2005-06 and 2006-07

75

3.1

Time limit for establishment of units

81

3.2

Prescribed time limit for repayment of loan

81

3.3

State-wise details of input units sanctioned under NABARD

82

3.4

Details of bio-fertilizers units sanctioned under NCDC

83

3.5

Global nitrogen input and nitrogen circuits in agriculture

84

3.6

State-wise details of organic manure production units, 2007-08

87

3.7

State-wise details of compost/vermin-compost production, 200708

88

3.8

Status of green manure production across different states, 200708

89

3.9

Production of different bio-fertilizers, 2004-05 to 2007-08

90

3.10

State-wise installed capacity and production, 2007-08

91

3.11

Scenario of bio-fertilizer production in India, 2003-04 to 2007-08

92

3.12

Different types of bio-fertilizer production across states, 2007-08

93

4.1

Details of sample units selected for the study

112

4.2

Distribution of the sample

113

4.3

Socio-economic characteristics of the sample

115

4.4

Primary details of sample units

117

4.5

Financial details of sample units

120

4.6

Checklist for basic components in the units

121

4.7

Capacity utilization of sample units (TPA)

122

4.8

Break-up of average cost of production of vermin-compost in


Western states

124

4.9

Break-up of average cost of production of vermin-compost in


Northern states

126

4.10

Comparison of costs and returns between Western and Northern


regions

126

4.11

Summary of economics of vermin-compost production in India

127

4.12

Frequency distribution of efficiency of organic input units

128

4.13

Average efficiency of organic input units across states and


regions

129

4.14

Scale efficiencies in organic input units

130

4.15

Unit size and efficiency relationship

130

4.16

Determinants of efficiency in organic production units

132

4.17

Checklist for quality parameters in the units

133

4.18

Repayment pattern of sample units

134

4.19

Participation in training programs and sources of information

135

4.20

Awareness about NPOF scheme

137

4.21

Role of training programs on efficiency

138

4.22

Impact of subsidy on efficiency

138

6.1

Classification of input units based on market demand

190

6.2

Market demand over four quarters

191

6.3

Details about procurement of vermin-compost

192

6.4

Details about procurement of bio-fertilizers

194

6.5

Details about procurement of bio-pesticides

195

7.1

Distribution of organic sample farmers

198

7.2

Socio-economic details of organic farmers

199

7.3

Summary of cropping patterns in the study area

200

7.4

Economics of paddy cultivation in Punjab

203

7.5

Economics of wheat cultivation in Punjab

204

7.6

Economics of cotton cultivation in Punjab

205

7.7

Economics of paddy cultivation in U.P

206

7.8

Economics of sugarcane cultivation in U.P

208

7.9

Economics of wheat cultivation in U.P

209

7.10

Economics of sugarcane cultivation in Maharashtra

210

7.11

Economics of cotton cultivation in Gujarat

211

7.12

Frequency distribution of technical and scale efficiencies of


paddy farms (Punjab)

221

7.13

Frequency distribution of technical and scale efficiencies of


wheat farms (Punjab)

222

7.14

Frequency distribution of technical and scale efficiencies of


cotton farms (Punjab)

222

7.15

Frequency distribution of technical and scale efficiencies of


paddy farms (U.P)

223

7.16

Frequency distribution of technical and scale efficiencies of


sugarcane farms (U.P)

224

7.17

Frequency distribution of technical and scale efficiencies of


wheat farms (U.P)

224

7.18

Frequency distribution of technical and scale efficiencies of


sugarcane farms (Maharashtra)

225

7.19

Frequency distribution of technical and scale efficiencies of


cotton farms (Gujarat)

226

7.20

Determinants of efficiency in organic wheat (Punjab)

227

7.21

Determinants of efficiency in organic cotton (Gujarat)

228

List of graphs/figures

Fig no.

Title

Page no.

1.1

Scheme of sustainable development

1.2

Fertilizer production and consumption in India, 1951-52 to


2007-08

1.3

GHG emissions of the Agricultural sector

1.4

Consumption of pesticides in India, 1991-92 to 2006-07

2.1

Top ten countries with organic land

18

2.2

Development of certified organic land worldwide, 1998-2006

19

2.3

Top ten countries with largest wild collections, 2006

19

2.4

Top ten developing countries with organic land

22

2.5

Energy usage in different corn production systems

30

2.6

Typical marketing channel for organic products in India

44

2.7

India GDP per capita purchasing power parity

46

2.8

Operational structure of NPOP

63

2.9

Key groups involved in PGS process

73

3.1

Organic input demand framework

83

5.1

Benefits of Organophos organic fertilizer

146

Chapter I
Introduction

1.1 Sustainable development


Sustainable development is a pattern of resource use that aims to meet human
needs while preserving the environment so that these needs can be met not only in
the present, but also for future generations. It has also been defined as balancing or
fulfillment of human needs with the protection of the natural environment so that
these needs can be met in the indefinite future. According to the Brundtland
Commission which coined the term what has become the most often-quoted
definition of sustainable development as development that "meets the needs of the
present without compromising the ability of future generations to meet their own
needs (WCED Report, 1987)1.
Sustainable development - A new paradigm
The field of sustainable development can be conceptually divided into four general
dimensions: social, economic, environmental and institutional. The first three
dimensions address key principles of sustainability, while the final dimension
addresses key institutional policy and capacity issues. The three essential aspects of
sustainable development are:
Social - A socially sustainable system must achieve fairness in distribution and
opportunity, adequate provision of social services, including health and education,
gender equity, and political accountability and participation.

Economic - An economically sustainable system must be able to produce goods


and service on a continuing basis, to maintain manageable levels of government and
external debt, and to avoid extreme sectoral imbalances that damage agricultural or
industrial production.

See also Vanloon G.W et al., (2005) for detailed discussion

Environmental - An environmentally sustainable system must maintain a stable


resource base, avoiding overexploitation of renewable resources systems or
environmental sink functions and depleting nonrenewable resources only to the
extent that investment is made in adequate substitutes. This includes maintenance
of biodiversity, atmospheric stability, and other ecosystem functions not ordinarily
classed as economic resources.

Despite of many complications, the three principles outlined above do have


resonance at a common-sense level (Fig1.1). Surely if we could move closer to
achieving this tripartite goal, the world would be a better place; equally surely; we
frequently fall short in three respects. Thus there is ample justification for the
elucidation of a theory of sustainable development, which must have an interior
disciplinary nature2.

Fig 1.1 Scheme of sustainable development (Source: Barbier E., 1987)

Sustainable Agriculture
Sustainable agriculture refers to the ability of a farm to produce fertile soil for crops
and produce along with livestock and fish from managed ponds, without causing
severe or irreversible damage to ecosystem health. The two key issues in
sustainable agriculture are: biophysical, the long-term effects of various practices on
soil properties and processes essential for crop productivity and socio-economic, the
long-term ability of farmers to obtain inputs and manage resources such as labor.
2

For details see A Survey of Sustainable Development Social and Economic Dimensions (2001)

Sustainable agriculture integrates three main goals i.e., environmental health,


economic profitability, and social and economic equity. Sustainable agriculture is
necessary to attain the goal of sustainable development. According to the Food and
Agriculture Organization (FAO, 2007), sustainable agriculture is the successful
management of resources for agriculture to satisfy changing human needs while
maintaining or enhancing the quality of environment and conserving natural
resources. All definitions of sustainable agriculture lay greater emphasis on
maintaining an agricultural growth rate, which can meet the demand for food without
draining the basic resources.

1.2 Need for sustainable/alternative farming system


The performance of the agricultural sector influences the growth of the Indian
economy. Agriculture (including allied activities) accounted for 15.7 per cent of the
Gross Domestic Product (GDP-at constant prices) in 2008-09 as compared to 21.7
per cent in 2003-04. Notwithstanding the fact that the share of this sector in GDP has
been declining over the years, but its role remains critical as it accounts for about 52
per cent of the employment in the country. Agricultural sector also contributed 10.2
per cent of national exports in 2008-09 (Economic Survey, 2009-10). Agriculture
provides food for more than one billion people and yields raw materials for agrobased industries. Modernization of Indian agriculture has began during the midsixties which resulted in the Green Revolution making the country a food grain
surplus nation from a deficit one depending on food imports. But, modern agriculture
has yielded several problems besides creating a very unsustainable system for
mankind (Worthington, 1980). Cultivation of crops became more dependent on
inputs purchased from the market, and farmers began to sell a greater share of the
crop in the market. The rising costs of cultivation and uncertain output prices made
the modern agriculture system non-viable.
Problems in conventional/modern farming
a. Impact of Green Revolution
The misplaced glory of Green Revolution was on the basis of the use of High
Yielding Varieties (HYV), heavy doses of chemical fertilizers, pesticides, and heavy
farm mechanization that led to unprecedented pressure on our natural resource
3

base. Green Revolution has encouraged an increase in the production of mainly two
crops, wheat and rice, but the cost paid was in terms of destruction of other crops
(especially coarse cereals and pulses) and over exploitation of precious water
resources and fertile soils. The high dosage application of fertilizers (see fig 1.2)
deteriorated the physical, chemical and biological properties of soil on one side, on
the other, increased soil salinity and pollution of ground water resources. The use of
pesticides has been posing serious environmental and health problems. Due to the
changed mode of traditional agriculture, disappearance of cattle from the farms,
reducing biodiversity, reducing biological productivity and nutrient recycling creating
a crisis of non-sustainability, both economical and ecological. Monoculture of crops
by exploiting the natural resources and ignoring the externalizing ecological and
environmental costs with a false image of crop yields. After the withdrawal of initial
subsidies, the external/high cost input combination of crop production can not be
sustainable in the long run. This is clearly evident in pushing the farmers in to a debt
trap or high dependency on credit (NSSO 59th Round, 2003).

Fig 1.2 Fertilizer production and consumption in India, 1951-52 to 2007-08


(Source: Sharma and Hrima, 2009)
b. Impact on soil characteristics
The indiscriminate use of fertilizers increases the phosphate, nitrate and heavy
metals content in soil. The excessive inorganic elements accumulate in the soil lead
to immobility of many essential nutrients, finally forms a kanker pan in the terrestrial
ecosystem. Example, application of DAP immobilize the phosphate and is strongly

adsorbed in the soil surface. Another problem of phosphate is absorption of heavy


metals in the soil. Heavy doses of application of fertilizers caused irreversible
damage to the soil structure over the years. When the soil productivity graph
declined, the poor farmers resorted to increase the dosage of chemical fertilizers to
sustain farm production. The increased chemical inputs resulted in soil toxicity,
disturbed the soil micro-environment and there-by impeded organic matter recycling
in the soil.
c. Impact on climate
In agro-ecosystems, mineral nitrogen in soils is the driver of crop productivity in
many cases. Crop productivity has increased substantially through utilization of
heavy inputs of soluble fertilizers mainly nitrogen and synthetic pesticides.
However, only 17 percent of the 100 Mt N produced in 2005 was taken up by crops.
The remainder was somehow lost to the environment. Between 1960 and 2000, the
efficiency of nitrogen use for cereal production decreased from 80 to 30 percent
(Erisman, et al., 2008). High levels of reactive nitrogen (NH4, NO3) in soils may
contribute to the emission of nitrous oxides and are main drivers of agricultural
emissions (fig 1.3).

Fig 1.3 GHG emissions of the Agricultural sector (Source: Smith et al, 2007)
The efficiency of fertilizer use decreases with increasing fertilization because a great
part of the fertilizer is not taken up by the plant but instead emitted into the water
bodies and the atmosphere. The emission of GHG in CO2 equivalents from the
production and application of nitrogen fertilizers from fossil fuel amounted to 750 to
1080 million tonnes (1 to 2 percent of total global GHG emissions) in 2007. In 1960,
47 years earlier, it was less than 100 million tonnes. In summary, each year,
agriculture emits 10 to 12 percent of the total estimated GHG emissions, some 5.1 to
5

6.1 Gt CO2 equivalents per year. Smith, et al. (2007) and Bellarby, et al. (2008) have
proposed mitigation options for GHG emissions, finding that both farmers and policymakers will face challenges from the GHG-related changes needed in agriculture.
d. Reduction in genetic-diversity and threat of GM crops
Prior to the Green Revolution, diversity in crops was a key factor in agricultural
systems in India. It provided stability and resilience to the systems as well as
economic security to the farmers. However, after the introduction of modern
technology, more emphasize upon mono-cropping, high mechanized farming
focused on single function of single species. This resulted in the erosion of genetic
diversity base of agro-ecosystems. The destruction of agro-biodiversity has resulted
in depriving the marginal farmers getting multiple products from the farms. Many
research studies have proved that reduction in genetic-diversity lead to more
susceptibility to pests and diseases.
Genetically Modified (GM) foods are prepared by altering the genetic make-up of
plants by inserting genes from one species artificially into another one. The essential
reason they were introduced because it was assumed that they would ensure an
adequate food supply for the world population that is growing at an alarming rate.
These foods increase resistance to pests and herbicides and therefore help in
eliminating the use of chemical pesticides and various time consuming and
expensive processes to destroy weeds. More importantly, in countries like India, it is
believed by experts that these foods would also help in removing malnutrition as
normal foods can be genetically engineered to contain additional vitamins and
minerals (Science, 2009).
Though it is argued that these foods are a sure shot way to reduce hunger in
developing countries like India, but, many people believe that if hunger could be
solved by technology alone green revolution would have done it long ago.
Genetically modified foods would just succeed in strengthening corporate control
over agriculture research and contributes significantly to developed countries and not
to the resource-poor farmers in developing countries (Pingali and Traxler, 2002; Rao
and Mahendra Dev, 2009). Qaim (2005) also highlighted the pattern of adoption
these technologies in developing countries and summarized their possible influences

in three folds: a. Intellectual Property Rights (IPRs) b. associated with new


environmental and health risks and c. modern biotechnology permits a separation
between the act of developing a specific crop trait and breeding of locally adapted
germplasm.
e. Contamination of food and decline in nutritive values
The incessant application of chemicals not only polluting the grains but also the food
we consume (Rup Lal et al., 1989; ICMR Bulletin, 2001). The process of biomagnification3 and bio-concentration4 has lead to the accumulation of these
chemicals both in the tissues of the crops and also of the humans. The wide spread
application of chemicals lead to genetic mutation of pests and develop resistance to
these chemicals. According to Pimentel, 1995 only 0.1% of pesticide actually
reaches the target pests and the rest go to non-target sectors. The details of
consumption of pesticide (technical grade) in India from 1991 to 2007 are presented
in fig 1.4.
80
70

'000' tons

60
50
40
30
20
10

19
91

-9
19 2
92
-9
19 3
93
-9
19 4
94
-9
19 5
95
-9
19 6
96
-9
19 7
97
-9
19 8
98
-9
19 9
99
-0
20 0
00
-0
20 1
01
-0
20 2
02
-0
20 3
03
-0
20 4
04
-0
20 5
05
-0
20 6
06
-0
7

Ye ar

Fig 1.4 Consumption of pesticides in India, 1991-92 to 2006-07


(Source: www.indiastat.com)

Bio-magnification, also known as bio-amplification or biological magnification, is the increase in


concentration of a substance, such as the pesticide DDT, that occurs in a food chain as a
consequence of persistence (can't be broken down by environmental processes) or Food chain
energetics or Low (or nonexistent) rate of internal degradation/excretion of the substance (often due
to water-insolubility).
4

Bio-concentration is a process that results in an organism having a higher concentration of a


substance than is in its surrounding environmental media, such as stream water. Bio-concentration
differs from bio-accumulation because it refers to the uptake of substances into the organism from
water alone. Bio-accumulation is the more general term because it includes all means of uptake into
the organism.

The total consumption of pesticides in India has come down from 72.13 to 37.95
thousand tones between the period 1991-92 and 2006-07. There was a significant
decline (almost half) in the consumption of total pesticides in the country over a span
of 15 years. The reduction in the consumption may be due to the introduction of IPM
technologies and conduct of awareness programs by the Department of Agriculture,
Government of India.
But, according to AICRPPR report, 1999 - Pesticide Safety: Evaluation and
Monitoring identified only 2 per cent of food commodities worldwide were found to be
above MRL, but in India this figure was as high as 20 per cent. In states like Uttar
Pradesh and Kerala, food samples exceeding MRL were as high as 46 per cent and
53 per cent respectively. In general, fruits and vegetables and milk are Indias most
contaminated food items.
Poison Report, Down to Earth, Vol 12, No 15 December 31, 2003
An analysis of Indias research trends reveals two interesting facts. While there was substantial and
rigorous research on pesticide residues in the 1960s and 1970s, research frequency started to drop
from the late 1980s and became non-existent in the 1990s. Could this be due to the pesticide
industrys growing clout? Or did government give up the regulatory ghost? Secondly, less research
is made public. Pesticide residue analysis is treated as a classified secret? But the last report
AICRPPR published was in 1999. No data has been made available since. Why? Are scientists now
collaborators in poisoning India?
Track record
Summary data showing contamination of different food
commodities in India (1965-1998)
Food item
Wheat

Samples
analyzed

Samples
Contamination
contaminated
(per cent)

1,352

628

46.4

Rice

463

405

87.4

Sorghum

137

52

37.9

Pulses

487

211

43

Vegetables

6,803

3,642

53.5

Major vegetables*

2,930

1,659

56.62

Fruits

458

192

42

Spices

284

183

71.5

Honey

148

135

91.2

13,062

7,107

54.4

Total

*Tomato, okra, cabbage, brinjal, capsicum, potato, cauliflower


Source: G S Dhaliwal and Balwinder Singh (eds) 2000, Pesticides
and Environment, Commonwealth publishers, New Delhi, p 207

With the pressures from Green Revolution, two major distortions have occurred in
the food basket. They are the disappearance of traditional food crops (ragi, foxtail
millet and banyard millet) and loss of nutrients from our food dishes. The changes in
the eating habits are pronounced in more nutrition deficiencies (Shiva et al., 2001;
Shetty, 2002). Modern/conventional agriculture practices have adversely affected the
quality of our food supply. Growing foods with methods designed to increase
production or to facilitate transportation and storage is often detrimental to their
nutritional value. Organic foods have been shown to have a higher nutritional value
than conventionally grown foods (Shiva et al., 2004)
The above problems in modern/conventional farming coupled with liberalization and
globalization of markets have aggravated the crisis in Indian agriculture. The impact
of these have translated in to high costs of production and collapsing prices for farm
produce is basis for suicidal economy where thousands of farmers committed
suicide across the country. It has been witnessed in each and every corner of the
country. There were at least 16,196 farmers suicides in India in 2008, bringing the
total since 1997 to 199,132, according to the National Crime Records Bureau
(NCRB). The share of the Big 5 States or suicide belt in 2008 - Maharashtra,
Andhra Pradesh, Karnataka, Madhya Pradesh, and Chhattisgarh - remained very
high at 10,797, or 66.6 per cent of the total farm suicides in the country (Sainath,
2010). The epidemic of farmers suicide is the real barometer of the stress under
which Indian agriculture and farmers have been put by globalization (Shiva et al.,
2000).

Further, it is also proved that modern agriculture cannot be sustainable in long run
because of the adverse changes being caused to the environment and the
ecosystem (Kaiser, 2004; Ghosh, 2004). These implications are also experienced by
declining crop yields and instability in crop production (Chand et al., 2008). The
necessity of having an alternative agriculture method which can function in friendly
eco-system while sustaining and increasing the crop productivity is realized now.
Organic

farming

is

recognized

as

the

best

known

alternative

to

the

modern/conventional agriculture. Due to the rising input costs involved in modern


farming and its un-sustainability due to overcapitalization has made organic farming
a necessity in many agriculturally grown regions (Singh, 2009). Organic farming has

been found to be as or more viable than conventional farming in the USA and
European countries due to either higher yield or lower cost or higher market prices
(Lampkin, 1994). Modern organic techniques have the potential to stabilize and even
increase sustainable farm yields with increasing soil fertility, environmental
sustainability and preserving biodiversity of the ecosystem. It will also increase the
nutritional value of the produce and reduces the pesticide residues in it.

Potential benefits of organic farming


The major problem in India is the poor productivity of our soils because of the low
content of the organic matter. The efficiency of the organic inputs in the promotion of
productivity depends on the organic contents of the soil. There were many
resemblances of organic farming principles in the traditional agriculture of India. But
the former gives a more open and verifiable scientific foundation than the latter
(Table 1.1). Natural plant nutrients from green manures, farmyard manures,
composts and plant residues build organic content in the soil. It is reported that soil
under organic farming conditions had lower bulk density, higher water holding
capacity, higher microbial biomass carbon and nitrogen and higher soil respiration
activities compared to the conventional farms (Sharma, 2003). This indicates that
sufficiently higher amounts of nutrients are made available to the crops due to
enhanced microbial activity under organic farming. Several indirect benefits from
organic farming are available to both the farmers and consumers. While the
consumers get healthy foods with better palatability and taste and nutritive values,
the farmers are indirectly benefited from healthy soils and farm production
environment.
Table 1.1 Benefits of organic farming
Parameter
Agriculture

Potential benefits
Increased diversity, long-term soil fertility, high food quality, reduced
pest/disease, self-reliant production system, stable production

Environment

Reduced pollution, reduced dependence on non-renewable resources,


negligible soil erosion, wildlife protection, resilient agro-ecosystem,
compatibility of production with environment

Social conditions

Improved health, better education, stronger community, reduced rural


migration, gender equality, increase employment, good quality work

Economic conditions

Stronger local economy, self-reliant economy, income security,


increase returns, reduced cash investment, low risk

Organizational/institutional Cohesiveness, stability, democratic organizations, enhanced capacity


Source: Singh, 2009, Stoll, 2002, Crucefix, 1998

10

The important event in the history of the modern nascent organic farming in India
was the unveiling of the National Programme for Organic Production (NPOP) in
2000. Later, Department of Agriculture and Cooperation, Ministry of Agriculture has
also launched a central sector scheme entitled National Project on Organic Farming
(NPOF) during Xth Five year plan. It includes capacity building through service
providers; financial support to different production units engaged in production of biofertilizers, fruit and vegetable waste compost and vermi-hatchery units and human
resource development through training on certification and inspection, production
technology etc. The establishment of production units under this scheme is being
provided as credit-linked and back-ended subsidy by NABARD and NCDC.
1.3 Scope of the study
Broadly, the present study has been planned to cover five major issues. First, an
overview of organic farming in the World and in India and SWOT analysis of organic
farming to articulate, refine, redefine policy prospective and schemes. What are the
under lying issues and conceptual framework are also briefly examined. Second,
what is the capacity utilization and efficiency of production units sanctioned under
NABARD and NCDC? What are the main attributes of promoters and units affecting
this efficiency? Policies related to training and subsidies and their impact on
efficiency are also analyzed. Third, what are the constraints in establishment of units
and identification of problems in marketing of organic inputs? Fourth, examine the
constraints in procurement and usage of organic inputs by organic farmers. What are
the suggestions for effective implementation of the project are discussed. Finally
fifth, what is the economics and efficiency of organic farming in different states?
Factors influencing efficiency of these farms are also discussed.
Limitations of the study
Since the study has covered only four state of India, the results can not be
generalized to other states.

1.4 Plan of the study


The study is organized into eight chapters. Chapter 2 reviews the status of organic
farming in the World and India, SWOT analysis of organic farming and briefly

11

reviews the government policies in India. Chapter 3 gives the present status of
organic input production in India. In Chapter 4 discuss about brief review of literature,
analytical framework and specification of DEA model. Empirical results including
productivity and efficiency of sample units are examined. Costs and returns of vermicompost production across different states and regions are compared. Problems in
establishment of units and constraints in production are summarized. Finally,
suggestions for promoting of organic input production units are discussed.

In Chapter 5, examine the eight cases on three types of organic input units. Chapter
6 highlights the different marketing channels exists for marketing of organic inputs,
nature of organic input demand and intensity of demand are scrutinized. The
problems in procurement and usage of organic inputs are discussed. Chapter 7
analyzes the economics and efficiency of organic farming vis--vis conventional
farming. Factors influencing efficiency and suggestions for further strengthening of
organic farming in India are discussed. Finally, the main findings of the study,
conclusions and policy implications are summarized in Chapter 8.

******************

12

Chapter II
An Overview of Organic Farming
Household and national food security are complex and complicated goals influenced
by many factors such as technologies, human capacities, policies, prices, trade and
infrastructural context. Demand for food is certain to increase with increasing
population pressure and income, even though this demand and ability to supply the
demand are not equal in all communities. Indeed, todays total global agricultural
production is just sufficient to feed the current world population with both necessary
technologies and multilateral environmental agreements are available to help meet
development and conservation needs. However, hunger, poverty and environmental
degradation persist even as concerns about global human security issues continue
to increase. Moreover, the last decades provide uncompromising evidence of
diminishing returns on grains despite the rapid increases of chemical pesticide and
fertilizer applications (Sanders, 2006), resulting in lower confidence that these high
input technologies will provide for equitable household and national food security in
the next decades. Overall, global cereal output is declining, mainly among the major
producing and exporting countries (FAO, 2007).
Organic farming is an alternative way to overcome the problems of sustainability,
global warming and food security. Organic production systems are based on specific
standards precisely formulated for food production and aim at achieving agro
ecosystems, which are socially and ecologically sustainable. Organic agriculture has
developed and guidelines have been detailed over the last 50 years. Since the early
1990s, the term organic agriculture has become legally defined in a number of
countries. It has its roots in various terms, biodynamic, regenerative agriculture,
nature farming and permaculture movements which developed in different countries.
Numerous adaptations of the guidelines have taken place, but the common
understanding is that:
Codex Alimentarius Commission, a joint body of FAO/WHO defines organic
agriculture as holistic food production management systems, which promotes and
enhances agro-ecosystem health, including biodiversity, biological cycles and soil
biological activity. It emphasizes the use of management practices in preference to

the use of off-farm inputs, taking into account that regional conditions require locally
adapted systems. This is accomplished by using, where possible, agronomic,
biological and mechanical methods, as opposed to using synthetic materials, to fulfill
any specific function within the system. In its simplistic form organic agriculture may
be defined as a kind of diversified agriculture wherein crops and livestock are
managed through use of integrated technologies with preference to depend on
resources available either at farm or locally. It also emphasizes more on optimizing
the yield potential of crops and livestock under given set of farming conditions rather
than maximization.

The International Federation of Organic Agriculture Movements (IFOAM) has


formulated four broad principles of organic farming, which are the basic roots for
organic agriculture growth and development in a global context. These principles of
organic agriculture serve to inspire the organic movement in its full diversity. The
principles are to be used as a whole, which are composed as ethical principles to
inspire action. They are:
1. Principle of Health: Organic agriculture should sustain and enhance the health of
soil, plant, animal, human and planet as one and indivisible. Health is the wholeness
and integrity of living systems. It is not simply the absence of illness, but the
maintenance of physical, mental, social and ecological well-being. Immunity,
resilience and regeneration are key characteristics of health. In particular, organic
agriculture is intended to produce high quality, nutritious food that contributes to
preventive health care and well-being.

2. Principle of Ecology: Organic agriculture should be based on living ecological


systems and cycles, work with them, emulate them and help to sustain them.
Organic agriculture should attain ecological balance through the design of farming
systems, establishment of habitats and maintenance of genetic and agricultural
diversity. Those who produce, process, trade, or consume organic products should
protect and benefit the common environment including landscapes, climate, habitats,
biodiversity, air and water.

14

3. Principle of Fairness:

Organic agriculture should build on relationships that

ensure fairness with regard to the common environment and life opportunities.
Fairness is characterized by equity, respect, justice and stewardship of the shared
world, both among people and in their relations to other living beings. Fairness
requires systems of production, distribution and trade that are open and equitable
and account for real environmental and social costs.

4. Principles of Care: Organic agriculture should be managed in a precautionary


and responsible manner to protect the health and well-being of current and future
generations and the environment. It should prevent significant risks by adopting
appropriate technologies and rejecting unpredictable ones, such as genetic
engineering. Decisions should reflect the values and needs of all who might be
affected, through transparent and participatory processes.

Biodynamic agriculture was the first form of organic farming pioneered in tropical
regions in 1929 when a German farmer started to produce Demeter coffee in
Mexico. Other examples followed in New Zealand, Australia and Africa, all of them
initiated by European pioneers (Kotschi, 2000). All these individual initiatives had no
links to local farmers at that time. These have started to develop around the mid1980s when representatives from emerging NGOs had opportunities to learn about
sustainable and organic farming through development cooperation programmes.
Once the agro-ecological farming techniques had developed to a certain maturity
and confidence, farmers also wanted to reap economic benefits from these farming
systems. A number of NGOs from developing countries have observed the organic
markets in the North and considered organic as one possible strategy to add more
economic value to the crops which are already cultivated close to organic principles.
Value addition through a price premium was a key argument for them to pursue
organic agriculture instead of the sustainable agriculture approach. In general, the
pioneering stage in developing countries was induced by NGOs, sometimes in
cooperation with small-scale export opportunities and fair trade schemes. These
schemes primarily attempt to reduce poverty through increasing local and household
food security and incomes.

15

In India, organic farming is not new to farming community. Several forms of organic
farming are being successfully practiced in diverse climate, particularly in rain fed,
tribal, mountains and hill areas of the country. Much of the forest produce of
economic importance like herbs, medicinal plants, etc., by default come under this
category. Among all farming systems, organic farming is gaining wide attention
among farmers, entrepreneurs, policy makers and agricultural scientists for varied
reasons. In our country, first the Spice Board of India has taken a major initiative in
promoting the production and export of organic spices in a big way. To boost this
sector, the project 'Empowerment of rural communities to export organic spices' was
initiated. This project has been implemented by the Indian Spice Board, four NGOs,
the International Trade Centre, and exporters. Around 1500 tribal persons and
families got benefited from program (Fock, 2001; ISB, 2001).

Myths and reality about organic farming

There are several apprehensions about organic farming in mindset of scholars and
researchers itself. A large number of debates are going on between the proponents
of organic farming and a section of the community who questioned the scientific
validity and feasibility of organic farming.

The most common question one would expect is about food security issue in the
world. But, today organic agriculture is based on a sophisticated combination of
traditional knowledge, modern science, and innovation. Therefore, adopting organic
agriculture doesnt mean going back to the pre-industrial yields of our great-grand
parents. Many studies carried out in several parts of the world actually show that
organic farms can be almost as productive as conventional farms (in developed
countries) and sometimes even more productive (especially in developing countries).
A 21-year long study carried out in Switzerland by the FiBL (Forschungsinstitut fr
biologischen Landbau) Institute showed that the yields in organic farming are only 20
percent less than in conventional farming. Reviewing more than 200 studies carried
out in the US and Europe, Per Pinstrup Andersen (Professor at Cornell University
and winner of the World Food Prize) and his colleagues reached the conclusion that
yields in organic agriculture are around 80 percent of conventional yields. Another
study reviewing a global dataset of 293 examples found that in developed countries
16

organic systems, on average, produce 92 percent of the yields produced by


conventional agriculture (Badgley et al, 2007).

The second most important question one would ask is regarding the labor intensive
nature of organic farming. It is true that organic farming is often more labor intensive
than conventional agriculture. For instance, organic agriculture encourages the
maintenance of soil fertility through methods (such as compost and manure
application and anti-soil erosion landscaping) which are labor intensive. In
developing countries, these practices are generally performed by hand or with limited
technologies, which imply the availability of an adequate workforce. However, in
many areas of the World, land and capital (rather than labor) are the limiting factors.
In most developing countries labor tends to be cheaper than chemical inputs (such
as fertilizers and pesticides). In fact, there are many a range of labor saving
technologies and methods that can be applied in the developing countries. They
include use of cover crops to control of weeds and protect against soil erosion, the
use of direct mulching with crop residues, and reduced tillage. For example, if
properly managed, green manure/cover crops can produce from 50 to 140 ton/ha
(green weight) of organic matter with limited work (IFOAM, 2008)

The third question is related to its relevance to Indian farming system. Yes, India has
high comparative advantage in organic food production to compete in the
international market. Only 35% of Indias total cultivable area is covered with
fertilizers where irrigation facilities are available and in the remaining 65% of arable
land, which is mainly rain-fed, negligible amount of fertilizers are being used.
Farmers in these areas often use organic manure as a source of nutrients that are
readily available either in their own farm or in their locality. The north-eastern region
of India provides considerable scope and opportunity for organic farming due to least
utilization of chemical inputs. It is estimated that 18 million hectare of such land is
available in the North-East, which can be exploited for organic production. With the
sizable acreage under naturally organic/default organic cultivation, India has
tremendous potential to grow crops organically and emerge as a major supplier of
organic products in the Worlds organic market. Need is for putting up a clear
strategy on organic farming and its link with the markets (Ramesh et al., 2005)

17

2.1 Status of organic farming in the World


Organic agriculture is developing rapidly, and statistical information is now available
from 138 countries of the World. Its share of agricultural land and farms continues to
grow in many countries. According to the latest survey on organic farming worldwide,
almost 30.4 million hectares are managed organically by more than 700000 farms
(2006). In total, Oceania holds 42 percent of the Worlds organic land, followed by
Europe (24 percent) and Latin America (16 percent). Currently (as of the end of
2006), the countries with the greatest organic areas are Australia (12.3 million
hectares), China (2.3 million hectares), Argentina (2.2 million hectares) and the US
(1.6 million hectares) (Fig 2.1). The proportion of organically compared to
conventionally managed land, however, is highest in the countries of Europe. On a
global level, the organic land area increased by almost 1.8 million hectares
compared to the consolidated data from 2005. Almost all continents, the area under
organic agriculture has grown up. The largest growth was in Oceania/Australia with
0.6 million hectares, followed by Europe where the organic area increased by half a
million hectares and Asia with 0.4 million hectares. The global survey on organic
farming was also collected data on certified organic wild collection (Fig 2.2). Thirtythree million hectares are certified for wild harvested products (2006). The majority of
this land is in developing countries quite the opposite of agricultural land, of which
more than two thirds is in industrialized countries (FiBL Survey, 2008) (Fig 2.3).

Fig 2.1 Top ten countries with organic land (FiBL Survey, 2008)

18

Fig 2.2 Development of certified organic land worldwide, 1998-2006

Fig 2.3 Top ten countries with largest wild collections, 2006

Global demand for organic products remains robust, with sales increasing by over
five billion US Dollars a year. Organic Monitor estimates international sales to have
reached 38.6 billion US Dollars in 2006, double that of 2000, when sales were at 18
billion US Dollars. Consumer demand for organic products is concentrated in North
America and Europe; these two regions comprise 97% of global revenues. Asia,
Latin America and Australia are also important producers and exporters of organic

19

foods. The global organic food industry has been experiencing acute supply
shortages since 2005. Exceptionally high growth rates have led supply to tighten in
almost every sector of the organic food industry. The most important import markets
for organic products are the European Union, US and Japan, and thus their
regulations have a significant impact on global trade and the development of
standards in other regions.
Today, around 468 organizations worldwide offer organic certification services (table
2.1). Most certification bodies are in Europe (37 percent), followed by Asia (31
percent) and North America (18 percent). The countries with most certification
bodies are the US, Japan, South Korea, China and Germany. Currently, 36
certification bodies have received IFOAM accreditation by the International Organic
Accreditation Services (IOAS), which assesses certification bodies against the
IFOAM norms.
Table 2.1 Countries with number of certification bodies

Source: Organic Certification Directory, 2007 (Grolink, 2007)

Asia statistics
The total organic area in Asia is nearly 3.1 million hectares, managed by almost
130000 farms (table 2.2). This constitutes ten percent of the worlds organic
agricultural land. The leading countries are China (2.3 million ha), India (528171 ha)
and Indonesia (41431 ha). The highest shares of organic land of all agricultural land

20

are in Timor Leste (6.9 percent) followed by Lebanon (1 percent), Sri Lanka and
Israel (0.7 percent). Wild collection plays a major role in Azerbaijan, India and China
(all with more than one million hectares).
The Asian market continues to show high growth in terms of organic food production
and sales. Organic crops are grown across the continent, with some countries
becoming international suppliers of organic commodities. Retail sales were about
780 million US Dollars in 2006 (Organic Monitor). Demand is concentrated in Japan,
South Korea, Singapore, Taiwan and Hong Kong, the most affluent countries in the
region. Organic regulations have been established in eleven Asian countries, and
another eight countries are in the process of drafting organic regulations. Israel and
India have attained equivalency status with the EU regulation on organic farming.
Table 2.2 Organic agricultural area and farms in Asia, 2006

Source: FiBL Survey, 2008

21

Developing countries statistics


More than one quarter of the Worlds organic land is in developing countries (8.8
million hectares). Most of this land is in Latin America followed by Asia, Africa and
Europe. The leading countries in terms of organic land are China, Argentina,
Uruguay and Brazil. The highest percentages of organic land are in several Pacific
Island countries, East Timor, Uruguay and Argentina; in these countries, the shares
of organic land of all agricultural land are comparable to those in Europe. These high
shares can probably be attributed to a high potential for exports and to several
support activities in these countries. Out of the developing countries covered by the
survey, only few have a higher share of organic land than one percent of the
agricultural area. Thus, compared to developed countries, organic farming lags
behind (Fig 2.4)

Fig 2.4 Top ten developing countries with organic land (FiBL Survey, 2008)
As per 2008 global survey, the organic land use details were available approximately
for 95 per cent of the total area. A total of 4.45 million ha arable land accounts for
one sixth of the organic agricultural area. Most of the Worlds organic arable land is
in Europe, followed by North America and Asia. Most of the arable land is used for
cereals, including rice, followed by field fodder crops. Permanent crops account for
five percent of the organic agricultural land (1.5 million hectares). Most of this land is
in Europe, followed by Latin America and Africa. The most important crops are olives
(almost a quarter of the permanent cropland) followed by coffee, fruits and nuts.

22

Permanent pastures / grasslands (more than 20 million hectares) account for two
third of the Worlds organic land area. More than half of this grassland is in Australia.
2.2 Status of organic farming in India
India is bestowed with lot of potential to produce all varieties of organic products due
to its various agro climatic regions. In several parts of the country, the inherited
tradition of organic farming is an added advantage. This holds promise for the
organic producers to tap the market which is growing steadily in the domestic market
related to the export market. Currently, India ranks 33rd in terms of total land under
organic cultivation and 88th position for agriculture land under organic crops to total
farming area. The cultivated land under certification is around 2.8 million ha (200708, 1.9% of the GCA). This includes 1 million ha under cultivation and the rest is
under forest area (wild collection) (APEDA, 2010).

The organic land area has increased substantially between 2005 and 2006 and is
now more than 500000 hectares. Indian government has acquired both the USDA
equivalence for the NOP and the EU third country listing in 2006. Furthermore,
recognizing the difficulty smallholders face to access third party certification, the
government launched a national Participatory Guarantee System (PGS) program,
with the support of the FAO India office to facilitate organic assurance. The
government is also implementing a National Project on Organic Farming (NPOF) for
production, promotion, certification and market development of organic farming in the
country. Financial assistance is being provided for the capacity building through
service providers, setting up of organic input production units, promotion of organic
farming through training programs, field demonstrations, setting up of model organic
farms and market development.

India produced around 3,96,997 MT (2007-08) of certified organic products which


includes all varieties of food products namely Basmati rice, Pulses, Honey, Tea,
Spices, Coffee, Oil Seeds, Fruits, Processed food, Cereals, Herbal medicines and
their value added products (table 2.3). The production is not limited to the edible
sector but also produces organic cotton fiber, garments, cosmetics, functional food
products, body care products etc. The commodity wise details of quantity exported
and its value is presented in table 2.4.
23

Table 2.3 Organic food production in India, 2007-08


Total production

9,76,646 M.T.

Total quantity exported

37,533 M.T

Value of total export

USD 100.4 million

Total area under certification (including wild harvest)

2.8 million hectares

Total area under certified organic cultivation

0.45 million hectares

Share of exports to total production

4% approx.

Increase in export value over previous year

30% approx.

Source: APEDA, 2010

Table 2.4 Commodity wise organic food exports, 2007- 08


Commodity

Export
Contribution
(of volume)
43%

Export
Contribution
(of value)
25%

Export
Contribution
( Rs. Cr)
123.88

Basmati Rice

15%

13%

59.20

Honey

11%

10%

46.41

Tea

8%

20%

92.13

Dry fruits

7%

18%

84.31

Processed food

5%

4%

17.99

Sesame

4%

2%

9.13

Spices

3%

4%

20.09

Medicinal & Herbal


plants/products
Others

2%

2%

10.59

2%

2%

5.05

Cotton

Source: APEDA, 2010

India exported 86 items last year (2007-08) with the total volume of 37533 MT. The
export realization was around 100.4 million US $ registering a 30% growth over the
previous year. Organic products are mainly exported to EU, US, Australia, Canada,
Japan, Switzerland, South Africa and Middle East. Cotton leads among the products
exported (16,503 MT). According to the Indian Centre for Organic Agriculture
(ICCOA), a major reason for the growth in organic farming is increased awareness
among consumers in the country, even though until recently food was mainly being
exported. But over the last couple of years, the domestic market has started growing.

24

2.3 SWOT analysis of Organic farming


A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified
as strengths (S) or weaknesses (W), and those external to the firm can be classified
as opportunities (O) or threats (T). Such an analysis of the strategic environment is
referred to as a SWOT analysis. The SWOT analysis provides information that is
helpful in matching the firm's resources and capabilities to the competitive
environment in which it operates. As such, it is instrumental in strategy formulation
and selection.
The main focus of this section is to assess the Strengths, Weaknesses,
Opportunities and Threats (SWOT) of organic farming mainly in the Indian context.
Several studies conducted on organic farming by different researchers are very
precise and need based. An attempt was made to consolidate all these researches
conducted in India and abroad and tried to present them in a systematic body of
knowledge. This appraisal would give a clear understanding of facts about organic
farming and its relevance to Indian situation.

The present Indian organic market is a typical example of a market in the pre-growth
phase, suffering from the incertitude about the potential market, lack of successful
pioneers and courageous imitators, and incertitude about positioning. Typical nature
of the pre-growth-phase of an organic market is the incertitude of consumers and
many stakeholders. The unique selling proposition (USP) of organic products and
the differences from the conventional production are not clearly defined yet. The
awareness about the residual effects of pesticides is good in some states and in the
agglomeration of cities and metropolis of India. This awareness is a very important
factor in the assessment of the present status. Actually, some products that are sold
as products with less pesticide are available in the market but law in India does not
protect the term "organic". If we dont take the export market into consideration, the
situation of the domestic market is in some aspects similar to the situation in
Switzerland or EU in the beginning of the nineties; especially regarding the aspects
of awareness, implementation of national guidelines and distribution. All documented
trends about the Indian food-market or the Indian society are an encouraging sign for
further development of the organic products. Particularly, the fact that Indian
25

economy is expanding rapidly, is very positive for the domestic market. The
summary of SWOT analysis on organic farming is presented in table 2.5.
Table 2.5 Summary of SWOT analysis on organic farming
Strengths
Safety food
Comparative advantage in
organic food production
Low cost of production
High quality and improved
nutrition

Weaknesses
Productivity gaps
Lack of established markets
Poor quality management in
production and processing
Less incentives from Government
Low R&D investments on Organic

Improved soil health


Premium prices
Environmental sustainability
High water-use efficiency
Government policies (like NPOP)
Preserves traditional
varieties/species and high selflife

farming research
Organic market buyers/consumers
driven market
Lack of strategy for development of
organic market
Disjointed producers, processors
and traders
Adulteration and poor quality of
organic inputs
Large number of small farms with
weak organizational building
Intensive in nature and high labor
costs

Opportunities
Big and growing market potential
Growing purchasing power of
consumers
Growing health awareness
70% of GCA is under rain fed
agriculture
Reduce heavy subsidies on food

Threats
High cost of organic food
Costly and complex organic
certification process
Lack of infrastructure facilities (like
labs) and certification bodies
Only export regulated organic
market

and fertilizers
Control the nitrate losses and
Co2 emissions
Earn high export earnings

Low awareness about organic


inputs
Most of the fields are contiguous
and problem of contamination
Introduction of GM crops

26

2.3.1 Strengths
Organic farming has much strength than modern/conventional farming practices
globally and in particularly in India. These strengths have been validated by several
studies and researchers in the last one decade. The important strengths are:

2.3.1.1 Safety food


Generally, consumers attribute positive qualities and characteristics to organic foods.
Such attributions include the following: healthy, tasty, authenticity, lives up to its
promise, local, highly diverse, fresh, low in processing, whole food, natural, free
from pesticides, antibiotics, low in nitrate content, safe and certified. Organic plant
products contain markedly fewer value-reducing constituents (pesticides, nitrates);
this enhances their physiological nutritional value. They are just as safe as
conventional products as regards pathogenic microorganisms (mycotoxins, coli
bacteria). These products tend to have lower protein content and higher vitamin C
content.

Health claims are generally not substantiated by scientific research, even in cases
where the organic production system provides inherent nutritional advantages (e.g.
higher contents of bioactive compounds in fruits and vegetables or higher contents of
fat-soluble vitamins or polyunsaturated fatty acids in organic milk or meat). These
findings were also verified by other studies in UK. Nutritionally desirable CLA,
omega-3 fatty acids, vitamin E and carotenoids were increased in milk from organic
farms with grazing dairy cows. These compounds have all been linked to a reduced
risk of cardiovascular disease and cancer. By contrast, less desirable fatty acids (i.e.
omega-6 fatty acids and CLA10) were not increased in organic milk, which helps to
improve the crucial ratio between the two (Niggli et al., 2008).

Rekha et al (2006) conducted a study to verify the pesticide residues on different


organic farms as well as on market samples (conventional farms). Four groups of
pesticides, i.e., organochlorine, carbamates, organophosphorous and pyrethrites
were analyzed in wheat and rice samples. Presence of organochlorine pesticide
residue was observed in two out of ten organic farms, which were converted from
conventional to organic practices few years ago. This was attributed to excessive

27

use of synthetic pesticides. Wheat and rice samples taken from market (conventional
farm) showed significant level of pesticide residues (table 2.6). Method used for
extraction of pesticides was validated with recovery studies, which showed more
than 80% recoveries for organochlorine, organophosphorous, carbamates and
pyrithroids respectively.
Table 2.6 Pesticides residues in different market samples

2.3.1.2 Comparative advantage in organic food production


India is strong in high quality production of certain crops like tea, some spices of rice
specialties, ayurvedic herbs etc. India also has a rich heritage of agricultural
traditions that are suitable for designing organic production systems (table 2.7).
Sophisticated crop rotation or mixed cropping patterns, for example the famous agroforestry systems of the Western Ghats, facilitate the management of pests, diseases
and nutrient recycling. Botanical preparations, some of which originate from the
ancient veda scripts, provide a rich source for locally adapted pest and disease
management techniques. The widespread cultivation of legume crops facilitates the
supply of biologically fixed nitrogen. In several regions of Indian agriculture is not
very intensive as regards the use of agro-chemicals. Especially in mountain areas
and tribal areas, use of agrochemicals is rather low, which facilitates conversion to
organic production. On these marginal soils, organic production techniques have
proved to achieve comparable or in some cases (especially in the humid tropics)
even higher yields than conventional farming. Compared to input costs, labor is
relatively cheap in India, thus favoring the conversion to less input-dependent, but
more labor-intensive production systems, provided they achieve sufficient yields,
where farmers have access to established organic markets within the country or
abroad, products can achieve a higher price compared to the conventional market.
Especially in the trend of decreasing prices for agricultural products, this can be an
important way to stabilize or even increase incomes.
28

Table 2.7 Crops for which comparative advantage in production

Source: Salvador et al., 2003

2.3.1.3 Low cost of production


Organic agriculture has triggered a controversial debate in the last decade, most
importantly because it shed light on the darker sides of chemical-intensive
conventional farming by offering an alternative. As more and more attention has
been put on determining whether organic systems are environmentally better or not,
it is not clear whether organic agriculture could be economically attractive enough to
trigger wide spread adoption. If organic farming offered a better environmental
quality, and potentially healthier foods, but not sufficient economic returns to the
majority of farmers, it would obviously remain a luxury way of food production
available to a very tiny fraction of farmers. However, the continued growth of
organically managed lands worldwide, especially in developing countries, does not
support this hypothesis.

An Indo-Swiss research team compared agronomic data of 60 organic and 60


conventional farms over two years (Eyhorn et al., 2005) and came to the conclusion
that cotton-based organic farming is more profitable: variable production costs were
13-20 percent lower, inputs were 40 percent lower, yet yields were 4-6 percent
higher in the two years, and as a consequence gross margins for cotton were also

29

30-43 percent higher. Although crops grown in rotation with cotton were sold without
a price premium, organic farms achieved 10-20 percent higher incomes from
conventional agriculture. Similarly, an impact assessment study for organic cotton
farmers in Kutch and Surendranagar commissioned by Agrocel concluded that
farmers who participated in the project enjoyed a net gain of 14-20 percent resulting
from higher revenues and lower costs. The updated version of the study surveying
125 organic cotton farmers concluded that 95 percent of respondents witnessed their
agricultural income raises after adopting organic agriculture, on average by 17
percent, most of them attributing this largely to the reduced cost of production and
higher unit output prices (MacDonald, 2004). In conclusion, studies found organic
cotton farming more profitable than conventional.
An energy analysis (gallons diesel per acre) of Rodale Institutes Farming Systems
Trial (FST) showed a 33 per cent reduction in fossil-fuel usage for organic
corn/soybean farming systems that use cover crops or compost instead of chemical
fertilizers (fig 2.5). Moreover, Rodale Institutes organic rotational no-till system can
reduce the fossil fuel needed to produce each no-till crop in the rotation by up to 75
percent compared to standard-tilled organic crops (Pimentel, 2006).

Fig 2.5 Energy usage in different corn production systems

2.3.1.4 High quality and improved nutrition


Growers and consumers of organic food products (raw vegetables and fruits, in
particular) widely claim that organic food products have a better shelf life and taste.

30

Evidences suggest that food items produced using alternative sources of crop
nutrients (i.e. without fertilizers) foods were more nutritious than those produced
conventionally (Worthington 2001). Organic food products generally had more of
vitamins, minerals and less of nitrates than those grown with conventional
agricultural food. This aspect can contribute to the nutrition security of a nation and
equally to its food security.

A study conducted by Campden Research Station in 2008 (Analytical survey of the


Nutritional Composition of organically Grown Fruits and Vegetables) revealed that
there are differences in nutritional status between organic and non-organic produce.
The results are summarized in table 2.8.

Table 2.8 Differences in nutritional status between Organic and non-organic


produce
Product
Apples
Sugars (total)
Vitamin C
Tomatoes after dehydration
Sugars (total)
Tomatoes
Vitamin C
Vitamin A
Tomatoes after dehydration
Vitamin C
Vitamin A
Carrots
Glucose
Potassium
Carrots after dehydration
Sugars (total)
Potatoes
Sugars (total)
Vitamin C
Potassium
Zinc
Potatoes after hydration
Sucrose
Fructose
Glucose
Iron
Calcium
Zinc

Nutrients in organic food


per 100 g

Nutrients in chemically
produced food per 100 g

8.8 g
21.6 mg

9.5 g
19.3 mg

63.4 g

70.0 g

21.8 mg
4.7 mg

18.0 mg
3.5 mg

349 mg
7.3 mg

288 mg
5.5 mg

0.9 g
269 mg

1.3 g
217 mg

42.8 g

52.8 g

0.7 g
13.5 mg
329 mg
310 g

0.8 g
17.8 mg
370 mg
260 g

1.0 g
1.2 g
2.0 g
5.7 mg
64.0 mg
1810 g

2.4 g
0.7 g
1.2 g
4.7 mg
56.4 mg
1350 g

31

2.3.1.5 Improved soil health


Scientific research has demonstrated that organic agriculture significantly increases
the density and species of soils life. Organic farming encourages the growth of soil
fauna and flora as well as soil forming, conditioning and nutrient cycling. The
biomass of earthworms in organic system is 30-40% higher than conventional
system, their density even 50-80% higher. Earthworms can increase the availability
of phosphorus from rock phosphate by 15-39 per cent. They act as mini-subsoilers,
their burrows increasing soil aeration, drainage and porosity. The ratio of microbial
carbon to total soil organic carbon is higher in organic farming. Microbial biomass
and enzyme activities are closely related to soil acidity and soil organic matter
content.

Reganold et al (1987) compared the long term effects (since 1948) of organic and
conventional farming on selected properties of the same soil. The organically farmed
soil had significantly higher organic matter content, thicker topsoil depth, higher
polysaccharide content, lower modulus of rupture and less soil erosion than the
conventionally farmed soil (table 2.9). This study indicated that, in the long term, the
organic farming system was more effective than the conventional farming system in
reducing soil erosion and therefore, maintaining soil productivity.

Table 2.9 Mean values of soil properties

Haas et al., (2005) conducted a study in Hamburg, Germany to estimate the


environmental impact of conversion to organic agriculture by using a Life-Cycle
Assessment (LCA) method. The projected nutrient-balance data of each system to
32

the farmed area was calculated and presented in table 2.10. The N surplus in
conventional farming was twice as high as in the organic scenario. In organic
agriculture, the P and K balances indicate a slight deficit. The N surplus in
conventional farming was as high as the N input via mineral fertilizer, indicating an
inefficient use, though higher yields and therefore nutrient outputs were achieved. No
straw or roughage was imported from outside the study area. Therefore, in organic
agriculture only a small amount of nutrients was imported via purchased feed (e.g.,
concentrates). Deficits for P and K in organic agriculture indicate that there is no
environmental impairment (e.g., eutrophication). After converting to organic
agriculture, no fertilization is needed for many years if previous conventional farming
caused nutrient-rich soils, which still is often the case in many European countries.
Table 2.10 Regional nutrient balance scenario of conventional (Conv.) and
organic farming (Org.)

2.3.1.6 Premium prices


Organic products often sell for higher prices than conventionally produced goods.
The price premium results from higher production and distribution costs for organic
food, as well as consumers' willingness to pay extra for organic food. As long as
demand increases faster than supply and prices of conventionally produced food
remain constant, organic food will continue to sell for higher prices. As farmers
receive higher prices for their organic products, they increase production, and attract
other farmers to the organic sector. At the same time, as the price differential
between organically and conventionally grown products diminishes, more consumers
are likely to purchase organic food. However, relative changes of supply and
33

demand will determine whether price premiums continue for organic farmers and
businesses. If supply begins to grow faster than demand, price premiums will
decline.
Consumer willingness to pay Premium
Consumers are buying organic food despite its generally higher price tag. Retail sales of organic
food increased from $3.6 billion in 1997 to $18.9 billion in 2007, accounting for over 3 percent of
total U.S. food sales. According to the Nutrition Business Journal, organic food sales could reach
an estimated $24 billion in 2010. Among the organic food categories, fruit and vegetable sales
were the largest ($6.9 billion), almost 37 percent of organic sales in 2007.

Source: Biing H.L et al., 2008

2.3.1.7 Environmental sustainability


The success of agriculture in the technologically-advanced countries has been
accompanied by a number of environmental problems. These problems have arisen
because of the need for insecticides, herbicides, and fertilizers, and the local
accumulation of large quantities of animal wastes. The less-developed nations have
not achieved the same success in food production, and yet it is prudent for them to
give attention even now to the environmental consequences of agricultural activities.
They must initiate courses of action, so that there will be the least possible
environmental perturbation as they come to rely more and more on pesticides and
fertilizers. Both the advanced and the less-developed countries, however, must now
devote considerable effort to minimizing salinization, erosion, and soil deterioration
(Alexander, 1973).
34

Commissioned by the Ministry of Environment of Hamburg, Germany, an


environmental impact assessment using the Life-Cycle Assessment (LCA) method
was carried out during 1995-96 (table 2.11). The effect of a complete transition from
conventional to organic agriculture of about 5,674 ha and 4,669 livestock units in a
rural part of Hamburg was investigated using 9 impact categories. It was estimated
for the study area for the year 1995 that through the conversion to organic
agriculture, the eutrophication potential could be lowered by reducing the nitrogen
(N) surplus by 75% (from 311 t to 77 t) and turning the phosphate (P) surplus of 47 t
into a deficit of 19 t. The ammonia emission decreased to 69% of the conventional
level (from 238 t to 165 t) resulting in a similar reduction of the acidification potential
(from 474 t to 328 t SO2- equivalents). Compared to conventional farming, 55% of
the primary energy was saved by organic agriculture (38,540 instead of 84,760 GJ),
which also lowered the global warming potential by 31% from 26,365 t to 18,271 t
CO2-equivalents. No pesticides were used, thus saving about 22.7 t of chemical
agents. This would lead to positive effects in the impact categories drinking water
quality, human toxicity and ecotoxicity, especially as most pesticides were applied
illegally and not in compliance with the regulations regarding minimum distance to
surface water. The biodiversity impact assessed by evaluating several indicators
during field visits showed a clear improvement for arable land, permanent grassland
and landscape structures (such as ditches and field boundaries).
Table 2.11 Environmental impact scenario comparing organic vis--vis
conventional farming

Source: Haas et al., 2005

35

2.3.1.8 High water-use-efficiency


Modern/conventional farming and Green Revolution are based on intensive irrigation
and non-sustainable water use. Organic agriculture or indigenous agriculture
depends on protective irrigation. Soil organic matter is a storehouse of plant nutrients
and a binding agent that influences soil erodibility and moisture holding capacity. The
water holding capacity (WHC) of modern/conventional farm ranged from 28-33%
where as, in case of organic farm it ranged from 42-47% (Shiva et al, 2004).
Diversity of crops and mixed cropping conserves moisture by reducing evaporation
and improving water-use efficiency. Studies have been proved that HYVs of wheat
needs about three times as much irrigation as traditional varieties. In general,
indigenous wheat varieties need 12 inches of irrigation where as the hybrid varieties
require at least 36 inches of water (Shiva et al., 2004).

2.3.1.9 Government policies (like NPOP, NPOF)


The Indian Government has recognized the export potential of organic agriculture
and is in the process of strengthening the sector by putting a legal framework in
place. This includes creating national organic standards and the possibility of
accrediting in-country inspection and certification bodies. National Programme of
Organic Production (NPOP) launched by the Ministry of Commerce during 2001 and
National Project on Organic farming (NPOF) launched during 2004 by the
Department of Agriculture and Cooperation, Ministry of Agriculture were the two
milestones towards institutionalization of organic farming.

Under NPOF, Government of India has initiated systematic promotion of organic


farming in the country in a project mode in specified areas. The project is being
operated by National Centre of Organic Farming (NCOF) and its six Regional
Centers of Organic Farming (RCOF). Capacity building through service providers,
human resource development through training and demonstrations, financial support
to organic input production industry, technology development, awareness creation
and market development are some of the important strategies being implemented
under the NPOF. More than 400 Government and Non-Government agencies are
working under the project. More than 300 farmers groups, each comprising of about
1500 farmers have started functioning to bring about 200,000 ha land under organic
certification process. With support to many organic production units a capacity has
36

been created to produce about 5000 MT of vegetable market waste compost, 3000
MT of bio-fertilizers and 78,000 MT of earthworm culture. 1848 trainings organized
under the project have benefited more than 37,000 trainers, extension professionals
and farmers. Besides above more than 4100 demonstrations have been conducted
and support has been provided for the establishment of 232 model organic farms
through out the country (NCOF, Ghaziabad)

2.3.1.10 Preserves traditional varieties/species

Seed is the embodiment of the ideas and knowledge of the culture and heritage of
the people. Seed thus, represents the wisdom of the years of research of the farmers
in that region. It is the first link in the food chain and is the ultimate symbol of food
security as well. Traditional seeds are locally available and collected good seeds
from the farmers own plots. Farmers either buy or exchange their seeds with other
farmers. So the cost of seed is either minimal or nil. An outstanding feature of native
seeds is diversity. They are hardy, developed resistance to the pests and diseases in
that area. These also have high levels of tolerance to conditions of stress and are
adapted to local agro-climatic conditions. The conservation of the seed is of
paramount

importance.

Thus,

organic

farming

preserves

the

traditional

varieties/species.

Foods are often picked before they are ripe and allowed to ripen in transit, at the
market or during home storage. The artificial ripening is also done by adding growth
hormones and chemicals in large quantity which adversely affects the physiology of
the food. They do not acquire their whole set of minerals and vitamins, which on
natural course of ripening are present during the later stages of growth. Food
products kept for longer duration as in transit or in market make them stale and
deteriorate their nutritional statue of the food. Fruits and vegetables lose significant
amounts of vitamin C with in three days in cold storage, and even more at room
temperature. We can over come these problems if we grow or buy organically grown
food.

37

2.3.2 Weaknesses
Despite of many large benefits about organic farming why do most farmers still
operate by modern/conventional farming practices? In general, organic farming has
certain weaknesses when compared with modern/conventional farming. Here, we
tried to explore these issues from consumers and producers as well as from
processors.

2.3.2.1 Productivity gaps


Yields on organic farms are generally lower than those on conventional or integrated
farms. The magnitude of these yield differences varies considerably in the literature.
A compilation of such data from five European countries is given in table 2.12.

Table 2.12 Average yields of organic crops (as % of conventional crops)

Source: Niggli et al., 2008

The recent meta-study modeled from National surveys showed significantly smaller
differences between organic and conventional yields from intensive farming in
developed countries. Based on 160 field experiments, the average yields of all crops
grown organically were only 9% lower than those grown conventionally. As most of
the data came from trials conducted on research stations, the actual productivity gap
may have been underestimated in this meta-study. On marginal soils and in less
favourable climatic conditions, under permanent or temporary water stress and
generally in subsistence agriculture, organic agriculture enhances food productivity.
In many situations, the adaptation of state-of-the-art organic farming offers
considerable potential for yield increase and yield stability.

38

2.3.2.2 Intensive in nature and high labor costs


It is true that converting to organic farming will not instantly solve all your problems
as a farmer. However, there are very few farmers, who revert back to conventional
farming after having converted to organic farming. Yet, the transition would be far
easier in this direction (organic to conventional) than it was from conventional to
organic because of conversion period requirements. This demonstrates that, overall,
organic farmers are happy with their situation, that they can make a living from it,
and that they find the advantages it brings more important than the disadvantages.

Organic farming also does not necessarily mean spending more time on farm. In the
absence of mechanization (due to lack of research support from the mainstream
system), several protocols of organic farming are indeed labour intensive. But this
fact should go in favour of developing countries such as India where about 80%
farmers are small-holder farmers and the government guarantees employment to its
rural masses, for 100 days in a year. In due course, it should be possible to reduce
the requirement of labour for several organic farming practices (Rupela, 2008).

2.3.2.3 Lack of established markets


Lack of established marketing channels or green markets are the major weaknesses
in Indian organic food industry. Absence of or incomplete product information and
certification procedures were also slowdown the growth of organic market in India.
Improving the quality of products, packaging, logistic infrastructure and technical
support to the producers and exporters are the need of the hour. More investments
are required for improving the quality of research and development in the country.
Government should apply and get for accreditation under different countries' national
organic regulations. Participation and promotion of Indian organic products at
international fairs (e.g. Bio-Fach) and creation of awareness to consumers will boost
the sales of organic products globally as well as domestically.

2.3.2.4 Poor quality management in production and processing


While the government has taken measures to make organic products popular in the
domestic market, the consumer is still waiting for the price to be on a par with other
products. Prices are likely to come down when the farmer completes the conversion
process and the output increases. As the demand goes up, other factors such as
39

economies of scale will automatically set in, leading to a further drop in prices.
Quality management in production and processing is an important step for organic
market development. Success in the Indian organic market will be a dream without
successful implementation of high quality standards. The quality management
manuals are useless, unless they are prepared based on the work done in the field.
The principles and standards of organic agriculture has to be known to all
stakeholders, such as, farmers, processors, traders, exporters government etc. and
the last but not the least to the consumers.

2.3.2.5 Less incentives from Government


Despite designating organic farming a major thrust area, India accounts for only
$123 million in a $40 billion global organic food market. Promoting transparency and
accountability, a traceability mechanism will build confidence internationally,
particularly in Europe where nearly 70 per cent of our exports go. Countless small
farmers are described as practicing organic farming "by default" because they can't
afford to invest in chemical fertilizer-reliant agriculture. This isn't necessarily a bad
thing if they can gain from it with greater access to training for skills upgrade,
awareness about marketing opportunities and even absorption into big, scientifically
run farms.
Conversion support scheme, 1987-1992
Denmark was the first country to introduce a financial support scheme for organic farming
on a significant scale in 1987. The scheme covered the development of extension,
information and marketing services as well as financial assistance during the conversion
period, which led to a three-fold increase in size of the organic sector. The conversion
support ranged between SK 750 and 2900 per ha per year for a maximum of three years,
depending on land quality, yield potential and land use.
In Norway, a conversion support scheme was introduced in 1990. Each farm converting
received a one-off payment of NK 15000 for farms less than 5 ha, and NK 20,000 for
farms larger than 5 ha. The total budget allotted for this activity was NK 16 million
including expenditure on advisory services and research.
In Australia, the conversion payments have resulted in a dramatic increase in the number
of organic farms (from under 1500 in 1989 to an estimated 9000 in 1993) and the area of
organically managed land (from 20,000 ha in 1989 to an estimated 135,000 ha in 1993 of
nearly 3% of Australian agricultural land).
Source: Lampkin and Padel, 1994

40

With greater conversion support schemes, more and more players can benefit from
the lower input costs as well as higher prices that organic farming represents
compared to conventional farming. The farmers, on the other hand, are looking for a
boost in the form of subsidies/financial support programs and a retail platform to
showcase their products, which until now are picked up by co-operatives or NGOs.

2.3.2.6 Low R&D investments on organic farming research


Research and technological development conducted within functioning organic
systems is essential to overcome some of the technical problems which still exists
and to improve further increase in the potential of organic farming in the country.
Current organic farming practices have been developed primarily by existing organic
farmers against the background of scientific knowledge. So, significant public funding
for research and development is crucial to boost organic farming sector further.
There is also a need for introduction of special courses on organic farming and
increase in number of training programs, particularly in state agricultural universities
which will boost the trust and awareness in farmers. The outcomes of these research
and experiments would also help to overcome the apprehensions about organic
farming in the country.

2.3.2.7 Organic market buyers/consumers driven market


Besides the producer-driven approach to organic agriculture, a market-driven
approach in developing countries has developed in parallel. The growing demand for
organic products in industrialized countries, particularly, the EU, United States and
Japan, has lead to a growing international trade over the past 15 years. The typical
character of Indian organic food market is buyers/consumers driven rather than
producers/supply driven. This is because of low awareness about organic food and
its benefits when compared to conventional food. The percentage of population who
has affordability to buy organic food is also low. But, it is taking up well in the recent
times with increase in health awareness. The producers/suppliers have no upper
hand in the market. However, they have to create more awareness among
population

and

market

their

products.

consumers/buyers only.

41

Ultimately,

the

choice

lies

with

2.3.2.8 Lack of strategy for development of organic market


The Indian organic market is a typical example for a market in the pre-growth-phase.
In this phase, there is already some awareness about food quality and pesticides
residues among consumers. This is advantageous for the fast growth of the organic
market. But, there is also a danger that the awareness is not based on the true
values of organic agriculture. Surprisingly different meanings for the word organic
are exists in the India. The expression organic is still not protected and the
awareness is diffused. It will be a difficult task to find the right approach to transform
this improper awareness in the correct way among consumers. So, the first important
strategy at the beginning itself to define what are organic products, how are they
different from conventional products. It will help in describing the USP (Unique
Selling Position) of organic products in the market. This is the reason why
awareness has to be created at the beginning. Positioning and credibility of the
organic products for the future are second important strategy for the organic market
development. Without consumers trust, organic farming is lost. Quality management
is the third important strategy for building up of an organic market. There will be no
success in Indian organic market without quality assurance on a high level.

2.3.2.9 Disjointed producers, processors and traders


Mainstreaming of organic foods has serious implications for the governance of
domestic and international supply networks. Collaboration between trade partners
has become increasingly important for the successes of any business sector.
Basically, Indian organic market is characterized by disjointed producers, processors
and traders. In countries like India, small scale producers play a crucial role in
expanding organic export sector due to organic farming being labor intensive in
nature and its compatibility with traditional peasant practices. Connecting these small
and marginal producers with organic export networks/chains is need of the hour.
Development of organic supply chains is viable solution to achieve this collaboration.
They refer to networking different actors being linked from farm to fork to achieve
more effective and market oriented flow of goods. Improvement of these chains
needs good knowledge to develop a workable structure and assurance of its
sustainability. Partnership and integration are the key factors of success for supply
chains (Singh, 2009).

42

2.3.2.10 Adulteration and poor quality of organic inputs


Absence of recognized/established organic input marketing channels led to the
problems

of

poor

quality

and

adulteration

of

organic

inputs

in

India.

Conventional/modern input dealers and retailers are not showing interest to deal with
organic inputs marketing because of low demand and lack of distribution network.
The erratic supplies of organic inputs and low levels of awareness of cultivators also
added to this situation (Narayanan, 2005). However, recently government has
formulated product standards and specification for vermi-compost, city-compost and
for bio-fertilizers. But, improper inspection and regulation makes these problems on
nascent organic farming in the country. Application of poor and adulterated organic
inputs looses the confidence of the farmers on organic farming due to their poor
performance. There is a need for government to initiate the establishment of organic
input marketing channels in the country (Ghosh, 2004). These channels not only
build the confidence in farmers but also assure timely availability at reasonable
prices. An emergency action for regulation is needed especially for marketing of biofertilizers and bio-pesticides for which the awareness among farmers is very low.

2.3.2.11 Large number of small farms with weak organizational building


The domestic market for organic products is not yet developed as the export market.
The products available in the domestic organic market are rice, wheat, tea, coffee,
pulses, fruits and vegetables. Wholesalers / traders and supermarkets play major
roles in the distribution of organic products. As most organic production originates
from small farmers, wholesalers / traders account for a 60% share in the distribution
of organic products (see fig 2.6). Large organized producers distribute their products
through supermarkets as well as through self-owned stalls. Considering the profile of
existing consumers of organic products, supermarkets and restaurants are the major
marketing channels for organic products. While certification is mandatory for exports,
products for domestic consumption are mostly uncertified. This is because most
producers are either small or marginal farmers, small cooperatives or trade fair
companies. The small farmers, scattered across the country, offer an incomplete
product range that are mostly available as a small or local brand. In contrast, in
countries like the US and Europe, every supermarket houses a complete range of

43

certified organic products. Therefore, the need of the hour is organized retailing and
marketing from the prevalent unorganized pattern (Singh, 2009)
Fig 2.6 Typical marketing channel of organic products in India

2.3.3 Opportunities
Organic farming has several opportunities right from growing domestic market to
earn high foreign exchange through agricultural exports. Countries like India have
strong comparative and seasonal advantages in organic food production. The huge
untapped potentialities are briefed below:

2.3.3.1 Big and growing market potential


Organic food products are slowly but steadily finding their way in the average Indian
household. As an upcoming segment in retail, it is indicative of the rising healthconsciousness among the Indian consumers. Pegged at Rs. 5.6 billion in 2008, the
organic food market is gradually witnessing the shift from being an elitist to a healthy
product. Although production and consumption figures in India are way behind the
world average, the market is now showing signs of consistent growth. As of now,
price continues to be the major deterrent. It is gradually being outweighed by factors
such as nutrition, taste, quality and better environment. The market for organic food
products has largely been characterized by inadequate retail presence, absence of
certified brands, incomplete range, higher price and highly export-oriented
government policies. Notwithstanding these shortfalls, retailers are optimistic about
the future, as awareness about the benefits of organic food is slowly picking up. India
may well take a long time to catch up with the global growth rate of 20-30% annually.
44

Recently International Competence Centre for Organic Agriculture (ICCOA)


conducted a survey in top 8 metro cities of India (which comprise about 5.3 % of the
households) to assess the organic food market potential and consumers inclination
and behavior towards organic food (table 2.13). The market study estimated that the
accessible market potential for organic foods in 2006 in top 8 metros of the country
at Rs 562 crores taking into account current purchase (2005-06 prices and
considering organic premium 10-20%) patterns of consumer in modern retail format.
The overall market potential is estimated to be around Rs.1452 crores, the
availability will however be a function of distribution-retail penetration and making the
product available to the customer. Another finding of the survey was consumers
preference for different categories of organic food. Across all cities and regions, the
most preferred category is the fresh vegetables followed by fruits, milk and diary
products.
Table 2.13 Market potential for organic foods

Source: Rao et al, 2006

2.3.3.2 Growing purchasing power of consumers


Indias Gross Domestic Product (GDP) expanded 7.90% over the last 4 quarters.
Indias GDP worth 1217 billion dollars or 1.96% of the world economy, according to

45

the World Bank. India's diverse economy encompasses traditional village farming,
modern agriculture, handicrafts, a wide range of modern industries, and a multitude
of services. Services are the major source of economic growth, accounting for more
than half of India's output with less than one third of its labor force. The economy has
posted an average growth rate of more than 7% in the decade since 1997, reducing
poverty by about 10 percentage points. The GDP per capita (Purchasing power
parity) of the country is presented in fig 2.7 between 2000 and 2008. It registered a
growth of 95 per cent with in span of eight years. This high purchasing power will
boost the domestic retail markets including organic foods. Growing health awareness
coupled with increasing per capita incomes enhances the affordability towards
organic food. (Source: www.tradingeconomics.com)

Fig 2.7 India GDP per capita purchasing power parity

2.3.3.3 70% of GCA is under rain fed agriculture


Majority of rain fed farmers in remote areas still practice low external input or no
external input farming which is well integrated with livestock, particularly small
ruminants. The average use of chemical fertilizers in rain fed areas based on a
survey of non irrigated SAT districts was found to be 18.5 kg as against 58 kg in the
irrigated districts (Katyal and Reddy, 1997). Based on several surveys and reports, it
is estimated that upto 30% of the rain fed farmers in many remote areas of the
country do not use chemical fertilizers and pesticides. Thus, many resource poor
farmers are practicing organic farming by default. The Government of India task

46

force on organic farming (2001) and several other reviewers have identified rain fed
areas and regions in north east are more suitable for organic farming in view of the
low input use (GOI, 2001; Dwivedi 2005; Ramesh et al 2005).
While rain fed regions undoubtedly offer good scope for organic production at least
in niche areas and commodities (table 2.14), a number of research, development
and policy issues need to be addressed before realizing the potential. They are:
development of protocols for organic production of important commodities through
farmers participatory network

research, create awareness, capacity building of

different stakeholders on different aspects of organic production and development of


preferential policy instruments for rain fed farmers particularly in terms of providing
market information, subsidized supply of inputs and group certification etc.
(Venkateswarlu, 2005).
Table 2.14 Commodity wise potential for organic production in rain fed regions
Commodity
Cotton
Sesame
Niger

Scope/Opportunity
Demand for organically produced lint.
To cut down on chemical use
Demand for organic sesame seed for
medicinal and confectionary uses
Demand for niger seeds produced
organically for bird feed in Europe

Lentil

Preference for Indian lentil in world markets;


organic product to fetch price premium

Safflower

Growing market for safflower petals as


natural food dye and herbal products
Scope to export fingermillet flour as health
food ingredient
Need for residue free crude drugs
Demand for residue free spices/natural
colours
To produce residue/toxin free table varieties
Demand for organically produced DOC for
livestock feed

Finger millet
Medicinal herbs
Ginger/Turmeric
Groundnut
Soybean

Potential Area
Maharashtra, A.P., Karnataka,
Gujarat
Gujarat, Rajasthan
Tribal areas of different states,
in particular Orissa and
Chhattisgarh
U.P.

Maharashtra
Karnataka, Orissa, Jharkhand
All over India
Orissa
Gujarat
M.P.

2.3.3.4 Growing health awareness


Organic products, which until now, were mainly being exported, are now finding
more consumers in the domestic market. The nutritional benefits of these products
have ushered in the organic food revolution in the country, which is currently at a
nascent stage. Although health is the key reason for growing demand, other

47

incidental benefits such as better taste and better environment are also driving
growth. There is growing awareness of the environment and the dangers of
chemically grown products. Besides, with a growing number of retailers offering
various organic products, they are now more visible and therefore, are more likely to
generate demand. Another key factor driving demand has been the change in the
consumer perception from organic products being elitist to healthy. The rising healthconsciousness will certainly trigger demand in the near future.
2.3.3.5 Reduce heavy subsidies on food and fertilizers
Food grain production in India has almost hit a plateau in recent years. In any case
the production is not commensurate with the increased use of high cost inputs like
seeds of hybrid/improved varieties, fertilizers and plant protection chemicals.
Agriculture production has tended to remain either stagnant or is declining despite
application of high cost inputs in large number of agricultural zones. Agriculture
production despite troughs due to drought and aberrant weather conditions showed
remarkable resilience but the quantum jump in production is conspicuous by its
absence. Experts attribute this stagnation to destruction of soil health due to
application of fertilizers and pesticides. However, estimates of fertilizer subsidy as
per central government budgets over the years in the post-reforms era show that it
has increased significantly. Table 2.15 presents the estimates of major subsidies
including the food and fertilizer subsidies in the post-reforms period (1991-92 to
2008-09). It is evident form the table that total subsidies have increased from Rs.
12158 crore in 1990-91 to Rs. 129243 crore in 2008-09, an increase by 10.6 times.
The fertilizer subsidy has increased from Rs. 4389 crore in 1990-91 to Rs. 75,849
crore in 2008-09 representing an increase of over 17 times. As a percentage of
GDP, this represents an increase from 0.85 percent in 1990-91 to 1.52 percent in
2008-09 (Sharma and Hrima, 2009).

India can with drawl this high burden of fertilizer subsidies by transforming major
cropped area to organic farming in systematic manner (Ghosh, 2004). It not only
saves our economy but also provides safety and sustainability to our soils and
environment. Government should develop a strategic plan for the phased
conservation of conventional/modern system to organic agriculture. An investment of

48

the same amount for encouraging the organic inputs use and on organic agricultural
research will propel our agricultural exports/ export earnings.

Table 2.15 Food and fertilizer subsidies in India, 1990-91 to 2008-09 (Crores)

Source: Sharma and Hrima (2009)

2.3.3.6 Control the nitrate leaching and CO2 emissions


The

nitrate

leaching

was

lower

in

organic

farming

compared

to

the

modern/conventional farming. The results of the studies on nitrate leaching


conducted in Germany and the Netherlands were summarized in table 2.16. It shows
that under Western European conditions nitrate leaching rates per hectare are
significantly lower in organic agriculture. Organic farming rely upon crop rotations,
crop residues, animal manures, legumes, green manures, off-farm organic wastes
and biological pest control to maintain soil productivity and tilth.

49

Table 2.16 Nitrate leaching rates per hectare


Reduction of nitrate leaching rates in Organic
farms compared to conventional farms
> 50 per cent
> 50 per cent

Authors
Smilde (1989)
Vereijken (1990)

57 per cent

Paffrath (1993)

50 per cent

Reitmayr (1995)

40 per cent

Berg et al (1997)

64 per cent

Haas (1997)

Source: Stolze et al., 2000

Agriculture is an undervalued and underestimated climate change tool that could be


one of the most powerful strategies in the fight against global warming. Nearly 30
years of Rodale Institute soil carbon data shows conclusively that improved global
terrestrial stewardship specifically including regenerative organic agricultural
practices can be the most effective currently available strategy for mitigating CO 2
emissions. Rodale Institutes Farming Systems Trial (FST) is the longest-running
side-by-side comparison of organic and conventional farming systems in the U.S.A
and one of the oldest trials in the world. It has documented the benefits of an
integrated systems approach to farming using regenerative organic practices. These
include cover crops, composting and crop rotation to reduce atmospheric carbon
dioxide by pulling it from the air and storing it in the soil as carbon. Results from
these practices corroborated at other research centers that include University of
California at Davis, University of Illinois, Iowa State University and USDA Beltsville,
Maryland, research facility reiterate the vast untapped potential of organic
agricultural practices to solve global warming.

In general, conventional/modern farming practices break down soil carbon into


carbon dioxide that is released into the atmosphere, greatly contributing to global
warming. Surprising analysis of the US oldest continuous cropping test plots in
Illinois showed that, contrary to long-held beliefs, nitrogen fertilization does not build
up soil organic matter. New data from U.S. government research shows that with
agriculture using chemical fertilizers and herbicides, the U.S. food system
contributes nearly 20 percent of the nations carbon dioxide emissions. On a global
scale, figures from the Intergovernmental Panel on Climate Change (IPCC) say that

50

agricultural land use contributes 12 per cent of global greenhouse gas emissions.
Organically managed soils can convert carbon from a greenhouse gas into a foodproducing asset. Soils that are rich in carbon conserve water and support healthier
plants that are more resistant to drought stress, pests and diseases. The study
conducted by Lasalle and Hepperly (2008) on organic systems have shown an
increase of almost 30 percent in-soil carbon over 27 years.

2.3.3.7 Earn high export earnings


Currently almost 90 organic products in 15 different categories are exported from
India. According to estimates given by APEDA, the organic sales in 2008 have
increased to 100 million US $ from 25 million US $ in 2005. By 2012 the market is
expected to grow six to seven times faster than previously and reach the billionmark, according to the ambitious planning by the National Centre for Organic
Farming (NCOF), which is part of the Ministry of Agriculture. The most important
export goods include organic cotton, currently accounting for a 25 %-share of sales,
followed by tea (20 %), dry fruits (18 %), basmati rice (13 %) and honey (10 %).
India is emerging as the top organic cotton-producing country, Oct 1st, 2009
Dr Selvam Daniel, Managing Director, ECOCERT India, an affiliate of the eponymous
French global certification MNC, has said that Indian textile companies would corner a
sizeable share in the global organic textile industry with India emerging as the top organic
cotton-producing country. The area under cotton cultivation increased to 161,000 hectares
in top organic cotton-producing countries like Syria, India, Turkey and China. In 2007-08,
global organic cotton production increased by 152 per cent. In India, Cotton is the single
largest crop under organic management with an output of approximately 142,714 MT during
the year 2006-07. Cotton is being grown mainly in Madhya Pradesh, Maharashtra, Orissa
and Andhra Pradesh. With an estimated production of more than 1.42 lakh tons of organic
cotton, India has probably achieved the status of largest organic cotton grower in the world
replacing Turkey. Majority of the cotton so produced is processed in India and is being
exported only as textile. As per International norms the textiles can not be labeled as
organic. All such textiles are sold/ exported under the brand Made from certified organic
cotton.
(Source: www.iccoa.org)

2.3.4 Threats
There are few threats for the growth of organic farming in India as well. Until and
unless we solve these issues/problems, the expansion of organic farming is in
question. The major concerns are:

51

2.3.4.1 High cost of organic food


High costs per unit of organic foods than the conventional food put the consumers on
the back track in India. But, the overall cost to society of producing food organically
is actually lower than the cost of conventional production. The price of conventional
food is artificially lowered by production-oriented subsidies. Negative externalities
caused by conventional farming are not accounted for the price of food (Pretty,
2005). Pretty in his another study in 2000 calculated that the total hidden or external
cost of non-organic farming in the UK to the environment and to human health was
2.34 billion per year (based on 1996 data) or 208 per hectare. Organic farming
has, by contrast, only one third of the hidden costs of non-organic agriculture, and
would reduce the external costs of agriculture by 1.6 billion or to 120 - 140 per
hectare. Actually, organic agriculture is still facing unfair competition in the
marketplace due to the competition distorting effect of current subsidy schemes. In
Northern countries, the organic premium is declining due to increasing economies of
scale in processing and commercialization of organic products as the sector
develops. Nevertheless, it is likely that a premium will remain due to additional
certification costs, higher consumer demand, and more demanding production
standards. In developing countries, uncertified organic food is generally cheaper to
produce and sold at the same price as conventional food. In some cases, the price
difference is the result of the specific willingness of consumers to pay higher prices
and does not reflect a higher cost of production.
2.3.4.2 Costly and complex organic certification process
Most certifiers are charging inspection and certification fees based on the number of
person days involved, plus fees for the issue of certificates. Sometimes, different
fees are applied for small farmers, large farmers, and processors or traders. An
example of the fee structure of a certification body operating in India is given in table
2.17. Over the past few years, many international certifiers opened branch offices in
India. The cost of certification is coming down but still it is very high for small holders
group and individual farmers. With the local certification bodies started to emerge,
the costs will soon reach lowest possible level while ensuring quality. Cost, quality of
certification, lengthy procedures, ability of services, international validity and
complicate in nature are constraints faced by the farmers. So while pursuing exportfriendly strategies, the authorities must think of innovative ways to ease the

52

certification process. Making universally recognized accreditation simpler and


cheaper for small organic farmers to acquire is the first step to increasing their formal
participation in the sector.

Table 2.17 Annual expenses for inspection and certification (Eg: Ecocert)
Type

1. Inspection and reporting


1.1 Small Holder Groups
1.2 Estates
1.3 Individual Farmers
1.4 Small Processors
1.5 Medium Size Processors
1.6 Manufacturers/exporters/ importers
2. Certification
2.1 Small Holder Groups
2.2 Estates
2.3 Individual Farmers
2.4 Small Processors
2.5 Medium Size Processors
2.6 Manufacturers/exporters/Importers

NPOP + International
Certifications
(EC, NOP or JAS)
Rs. 16,000 per day
Rs. 16,000 per day
Rs. 8000
Rs. 16,000 per day
Rs. 16,000 per day
Rs. 17,000 per day
Rs. 15,000 per day
Rs. 15,000 per day
Rs. 15,000 per day
Rs. 15,000 per day
Rs. 15,000 per day
Rs. 15,000 per day

Source: APEDA, 2010

2.3.4.3 Lack of infrastructure facilities and certification bodies


The organic supply chain currently suffers lack of infrastructure and high costs linked
to handling small quantities for growing niche markets. The greater diversity of
enterprises in organic production means that economies of scale are less easily
achieved. Post-harvest handling of relatively small quantities of organic foods results
in higher costs, especially given the mandatory segregation of organic and
conventional produce, particularly for processing and transportation. Marketing and
the distribution chain for organic products are relatively inefficient and costs are
higher because of the relatively small volume. As demand for organic food and
products increases and the sector get developed in infrastructure, technological
innovations and economies of scale are likely to reduce costs of production,
processing, distribution, and marketing for organic produce. This phenomenon is
already perceived by consumers in the main organic markets such as Germany and
the US, where some organic products are now being sold through usual marketing
channels. Till 2010, there were only 18 accredited certification bodies in the country
(table 2.18). The number of bodies is growing up slowly which are in-adequate.
Many state government agencies are in the queue and are getting ready for

53

obtaining accreditation. But, the recognized green markets are very few; the trade
channels are yet to be formed in the country.

Table 2.18 List of accredited certification bodies under NPOP


Sr. No

Name of the Certification Agency

Bureau Veritas Certification India


Pvt. Ltd.,

ECOCERT India Pvt. Ltd.,

IMO Control Pvt. Ltd.

Indian Organic Certification Agency


(INDOCERT)

Lacon Quality Certification Pvt. Ltd.,

6
7

Natural Organic Certification Agency


(NOCA)
OneCert Asia Agri Certification Pvt.
Ltd.

SGS India Pvt. Ltd.

Control Union Certifications

10
11
12
13

Uttarakhand State Organic


Certification Agency (USOCA)
APOF Organic Certification Agency
(AOCA)
Rajasthan Organic Certification
Agency (ROCA)
Vedic Organic Certification Agency

15

ISCOP (Indian Society for


Certification of Organic Products)
Food Cert India Pvt. Ltd

16

Aditi Organic Certifications Pvt. Ltd

14

17
18

Chhattisgarh Certification Society,


India (CGCERT)
Tamil Nadu Organic Certification
Department (TNOCD)

Contact Person & Address


Mumbai, Maharashtra
Aurangabad, Maharashtra
Bangalore
Cochin, Kerala
Thiruvalla, Kerala
Pune
Jaipur, Rajasthan
Gurgaon, Haryana
Mumbai, Maharasthra
Dehradun, Uttarakhand
Bangalore, Karnataka
Jaipur, Rajasthan
Hyderabad, A.P
Coimbatore, Tamil Nadu
Hyderabad, A.P
Bangalore
Raipur, Chhattisgarh
Coimbatore, Tamil Nadu

Scope of
Accreditation
NPOP, USDA, NOP
NPOP, USDA, NOP
NPOP, USDA, NOP
NPOP, USDA, NOP
NPOP, USDA, NOP
NPOP, USDA, NOP
NPOP, USDA, NOP
NPOP, USDA, NOP
NPOP, USDA, NOP
NPOP, USDA, NOP
NPOP
NPOP
NPOP
NPOP
NPOP
NPOP
NPOP
NPOP

Source: APEDA, 2010

2.3.4.4 Only export regulated organic market


Various countries in Europe, Latin America and Asia including Japan were
introduced organic legislation in the 1990s. In 1999, the Codex Alimentarius
approved the first guidelines for organic plant production, which were amended to
include livestock production in 2001. In the new millennium, most major economies
have established a regulation for organic production, including the Indian National

54

Programme for Organic Production (NPOP), which passed in 2001, the US National
Organic Program (NOP) that came into force in 2002, the Chinese legal framework,
which was finalized in 2005 and the Canadian legislation that passed at the end of
2006. According to the FiBL Survey, 2008; only 60 per cent of the countries in the
World have submitted their regulations whether they are implemented fully or
partially. Remaining 40 per cent of non-responding countries did not pass the
regulation in their country so far. However, in India the regulation was implemented
through National Project on Organic Production (NPOP). So far regulation in India
was limited to only export organic products but not in domestic market.

2.3.4.5 Low awareness about organic inputs


Many farmers in the country like India have only vague ideas about organic farming
and its advantages as against the conventional farming methods. Farmers lack
knowledge of compost making using the modern techniques and also its application.
Use of bio-fertilizers and bio-pesticides requires awareness and willingness on the
part of the farming community. Government should conduct more conferences,
seminars, and farmers' fairs to raise awareness and encourage adoption of organic
farming in the country. Programs demonstrating how to establish organic systems,
and training in how to produce and manage organic inputs, should be started at the
village level. Under the NPOF, sufficient provision has been made to train farmers for
organic production and internal control and to develop both model organic farms and
a nationwide network of organic service providers (to provide guidance, establish
farmers' groups and arrange organic inputs). There is also a need for establishment
of organic input channels for better marketing and timely availability.

2.3.4.6 Most of the fields are contiguous and problem of contamination


Most of the farmers in India are belong to small and marginal category. Most of their
fields are in small pieces and contiguous in nature. They lack fixed/strong field
boundaries and irrigation channels. It is very difficult for small and marginal farmers
to adopt organic techniques because of the problem of contamination. Most of their
fields are also not covered by any wind breaks/bio-fence. This lead to contamination
of fertilizers applied at one farmer plot to neighbour farmers plot through irrigation
water. Sometimes, the application of pesticides or herbicides will also contaminate
the adjoining farmer plot because of wind. These types of problems can only be
55

solved by group adoption of organic technology. The group adoption will also help
the farmers in better management of outbreak of new pests and diseases in that
area.

2.3.4.7 Introduction of GM crops


Genetic engineering is creating new forms of pollution identified as genetic pollution.
Across the World evidences are emerging about the reality of threat from this new
form of pollution. The nature of genetic pollution is different from that of chemical
pollution in the sense that there is no abatement for this type of pollution. The risks
associated with genetic pollution arise from a number of aspects of genetic
engineering. The transgenic organisms are modified organisms with a foreign gene
which behave differently in the ecosystem. The ecological impacts of such
organisms are a function of the explicit properties of the added genes, the effects of
new combinations of genes and specific environmental situations. Transgenic
organisms also carry risks because exotic genes are also introduced through the use
of viruses and plasmids as vectors, which themselves can create ecological risks.
Transgenic crops contain antibiotic resistance markers that carry the risks of
antibiotic resistance spreading. The summary of different field performances of
transgenic crops is presented in table 2.19.
Table 2.19 Field performance of transgenic crops

Source: Shiva et al., 2000

56

2.4 Underlying issues and Conceptual framework


Conversion from inorganic to organic farming takes a while for the soil to adjust to
both biological and chemical change processes. Due to this, farmer may face initial
years lower yields when compared to modern farming. There is a time lag for
attaining competitive yields in organic farming. But, in case of modern farming, the
results are input responsive and spontaneous. Farmers are getting lured to modern
farming

techniques

without

bothering

about

the

long

run

environmental

consequences and sustainability issues (box 1).


Box 1: Yield increases resulting from the so-called Green Revolution have slowed and
are currently linked to soil degradation (Kaiser, 2004), which is considered a threat to
food supply stability. Pimentel, et al. (2005) calculated a loss of nearly a third of the
worlds arable land to erosion within the last 40 years with an on-going loss of more than
10 million ha per year. Bellamy, et al. (2005) found massive losses of carbon in soils
across England between 1978 and 2003. Their estimates ranged from 0.5 to 2 g soil
carbon per kg soil per year with all but 8 percent of the investigated cropland affected by
erosion a factor the authors identified as the main reason for losses in soil carbon and
therefore in soil fertility.

It is a choice between the short term and long term interests of farmers. The long run
external environmental costs are much lower in organic farming than that of modern
agriculture. In some areas; organic farming has capacity to even reverse the
problems of land degradation (box 2).
Box 2: Reganold, et al. (1987), in comparing soils from organic and conventional farms in
Washington, USA, found organic fields had top soils 16 cm deeper and a higher organic
matter content which resulted in soils less prone to erosion. A long-term Swiss field
experiment on loess soil that began in 1978 (Mder, et al., 2002) found the aggregate
and percolation stability of both bio-dynamic and organic plots were significantly higher
(10 to 60 percent) than conventionally farmed plots. This also affected the water retention
potential of these soils in a positive way and reduced their susceptibility to erosion. Soil
aggregate stability was strongly correlated to earthworm and microbial biomass,
important indicators of soil fertility (Mder, et al., 2002). The long-term application of
organic manure positively influenced soil fertility at the biological, chemical and physical
level, whereas the repeated spraying of pesticides appeared to have negative effects.
Compared to stockless conventional farming (mineral fertilizers, herbicides and
pesticides), repeated measurements of aggregate stability in plots with livestock-based
integrated production (mineral and organic fertilizers, herbicides and pesticides) found
29.4 percent higher values while in organic and bio-dynamic plots (organic fertilizers
only), it was 70 percent higher (Siegrist, et al., 1998). The Swiss long-term study
underlines the importance of using manure, by means of organic agriculture, as a good
practice for soil quality preservation (Fliebach, et al. 2007).

57

Some times, it also leads to a conflict between individual and group approach
towards organic farming. All the farmers who are having contiguous fields should be
encouraged to follow organic methods to avoid problems related to leaching or
contamination of chemical fertilizers and pesticides. Increased food production in the
developing countries like India through conversion of subsistence systems to organic
management is more a serious proposition. The challenge is neither agronomic nor
economic but socio-political. Well managed organic agriculture uses a number of
preventive approaches that can greatly reduce the risk of severe yield fluctuations
due to climatic and other uncontrolled incidents, contributing to the resilience of the
food supply. Due to its agro-ecological approach, organic agriculture is an effective
means to restore environmental degradation and improve soil fertility.
Organic producer farmers anticipate premium prices for their products when
compared to that of modern agricultural outputs due to their quality and rich
nutritional value of produce. But initial lower yields coupled with marginal premium
prices in organic farming, farmers did not get convinced by this system. They are still
fascinated about modern farming ignoring long run sustainable benefits of organic
farming (box 3).
Box 3: K G Shirsagar (2008) studied the impact of organic farming on economics of
sugarcane cultivation in Maharashtra. The study is based on primary data collected from
two districts covering 142 farmers, 72 growing Organic Sugarcane (OS) and 70 growing
Inorganic Sugarcane (IS) in Maharashtra. The study finds that OS cultivation enhances
human labour employment by 16.90 per cent and its cost of cultivation is also lower by
14.24 per cent than IS farming. Although the yield from OS is 6.79 per cent lower than the
conventional crop, it is more than compensated by the price premium received and yield
stability observed on OS farms. The OS farming gives 15.63 per cent higher and more
stable profits on OS farms than the IS farms. The OS farmers also reported that the period
involved in conversion from conventional farming to organic farming is the most critical
one. The study also showed that it takes at least three years to complete the conversion
from inorganic to organic successfully. If feasible, the beginners should shift to organic
farming in stages rather than trying to convert all the landholding at once.

To promote sustainable agriculture in the country, government should encourage the


organic growers by providing some incentives to them. They also should get support
by linking them with domestic as well as export markets and by providing minimum
support prices to their products. The process of organic certification should be made
simpler so as to reach many small and marginal farmers in the country.

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2.5 Government Policies for development of organic farming in India


Brief history
Traditional agriculture in India dates back to the Neolithic age of 7,500-6,500 BC.
The farmers of ancient India are known to have evolved nature friendly farming
systems and practices such as mixed farming, mixed cropping and crop rotation. The
balance of cosmic forces, health and fertility were the main characteristics. Hindu
philosophy regards the earth as a living being. She is considered the source of all
plants, especially crops, and when cultivated or explored, provides all necessities of
life not only for human beings, but also for all other forms of life, right from the
smallest living cell to the largest animals. Farmers knowledge of plant life was highly
advanced.
The first scientific approach to organic farming can be quoted back to the Vedas of
the Later Vedic Period, 1,000 BC to 600 BC (Randhawa 1986 and Pereira 1993).
The essence is to live in partnership with, rather than exploit, nature. The
Vrkshayurveda (Science of plants), the Krshisastra (Science of agriculture) and
the Mrgayurveda (Animal Science) are the main works, (Mahale and Sore 1999).
Here agriculture was not developed just as a production system, but as a culture.
Great attention was paid to agricultural technologies and agronomic practices and
sophistication was achieved through genetic diversity, crop rotation and mixed
cropping systems. Animal husbandry was an integral part of the farming practice.
Classical Indian plant science, Vrikshayurveda in the form of Sanskrit hymns, is a
corpus of rich textual knowledge. It encompasses areas such as the collection,
selection and storage of seeds, germination, sowing, various techniques of plant
propagation, grafting, nursing and irrigation, testing and classification of soil and
selection of soil suitable to various plants/types of plants, manuring, pest and
disease management/ preventive and promotive care to build up disease resistance
and to cultivate healthy plants. Favourable and unfavourable meteorological
conditions were taken care off. Plants were used as indicators of weather, water,
minerals etc. This knowledge system is even today present with millions of Indian
farmers as its practitioners. Furthermore, it is propagated in many forms, such as folk
songs, rituals, proverbs and riddles. Organic agriculture practices make use of these

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indigenous knowledge systems and try to integrate them in the modern organic
agricultural practices, thus making changes easier and more effective.
Historical evidence indicates high yields in India comparable to todays highest levels
which was a result of the careful husbanding of soil and well adapted seeds and crop
varieties. India once had 30,000 varieties of rice. These varieties were not used at
random, but were delicately fitted into their appropriate ecological niches. In the
vision of this tradition, there is no distinction between the sacred and the profane:
everything is sacred. Farmers paid a great deal of attention to agriculture, livestock,
rain harvest and the art of composting. The wisdom gained and practices adopted by
these farmers were passed down through generations and became ingrained in the
cultural outlook of the society. Even today the belief system, the myths, rituals and
religious festivals of the Indians encompass these principles of soil, plant and animal
health.
In the past five decades, the traditional knowledge and organic principles were
eroded because of the influx of modern conventional agriculture. However, this
knowledge has been sustained by many Indian communities throughout the
millennia and has gained renewed importance recently for present agriculture,
especially organic agriculture. Organic farming practices still are a part of the living
tradition of most of the Indian communities in the tribal and dry land areas. With
organic production and trade fast increasing globally, there is a growing interest in
organic agriculture in the country. Traditional practices in India see the earth as a
living being and there is still reluctance to exploit the earth for short gains. Traditional
agricultural practices obviously can be improved and organic agriculture is the
closest to the farmers traditional customs, practices and beliefs (Mahale, 2002).

In 1983, the first training centre in organic agriculture was set up in Pondicherry
under a project called Agriculture, Man and Ecology (AME), implemented by
Educational Training Consultants, Leusden, the Netherlands and financed by the
Government of the Netherlands. In October 1984, the association for the propagation
of indigenous genetic resources organized the first conference on organic farming in
Wardha. In 1992, the Rajasthan College of agriculture organized a national seminar
on natural farming. In the same year, the first known study on ecological agriculture

60

in South India was published (van der Werf and de Jager 1992). Since then,
numerous farmers turned organic and important networks, such as ARISE
(Agricultural Renewal in India for a Sustainable Environment), were established. In
1993, a directory of individuals and organizations involved in sustainable agriculture
in India, called Green Farming was produced (Centre for Science and Environment
1993). In 1994, a register of 365 Indian organizations was published (ILEIA/ETC
India 1994). Not all organizations were involved in organic agriculture, but all were at
least related.
Government initiatives in promotion and regulation of Organic agriculture
National Programme of Organic Production (NPOP) launched by the Ministry of
Commerce during 2001 and National Project on Organic farming (NPOF) launched
during 2004 by the Department of Agriculture and Cooperation, Ministry of
Agriculture were the two milestones towards institutionalization of organic farming in
the country. The details of the two programs are:
National Programme of Organic Production (NPOP)
To provide a focused and well directed development of organic agriculture and
quality products, Ministry of Commerce and Industry, Government of India, launched
a National Program on Organic Production (NPOP) in the year 2000, which was
formally notified in October 2001 under the Foreign Trade & Development Act (FTDR
Act). It provides information on standards for organic production, systems criteria,
and procedures for accreditation of inspection and certification bodies, the national
organic logo and the regulations governing its use. The standards and procedures
have been formulated in harmony with international standards such as those of
Codex and IFOAM.

The NPOP proposes to provide an institutional mechanism for the implementation of


National Standards for Organic Production, through a National Accreditation Policy
and Program. The aim of the national program for organic production, inter alia,
includes the following:
a. To provide the means of evaluation of certification programmes for organic
agriculture and products as per the approved criteria.

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b. To accredit certification programmes


c. To facilitate certification of organic products in conformity to the National
Standards for Organic Products.
d. To encourage the development of organic farming and organic processing
Scope
The National Programme for Organic Production shall, among others, include:
(a) Policies for development and certification of organic products
(b) National standards for organic products and processes
(c) Accreditation of programmes to be operated by inspection and certification
agencies
(d) Certification of organic products
Operational Structure
The operational structure of the National Programme for Organic Production is given
in fig. 2.8. The program was developed and implemented by the Government of India
through its Ministry of Commerce and Industry as the apex body. The Ministry
constituted a National Steering Committee for NPOP, whose members will be drawn
from Ministry of Commerce and Industry, Ministry of Agriculture, Agricultural and
Processed Food Products Export Development Authority (APEDA), Coffee Board,
Spices Board and Tea Board and other government and private organizations
associated with the organic movement. To advise the National Steering Committee
on relevant issues pertaining to National Standards and Accreditation, subcommittees were appointed. The National Steering Committee for National Program
for Organic Production formulated a National Accreditation Policy and Program and
drew up National Standards for Organic Products, which included standards for
organic production and processes as well as the regulations for use of the National
Organic Certification Mark. National Accreditation

Policy and

Program

is

administered by the National Accreditation Body, which would define the overall
policy objectives for the Accreditation programmes and operations. The National
Steering Committee may amend the Accreditation procedures whenever it deems fit.
The National Accreditation Policy and Program is subject to periodic internal review,
which will be conducted by the Technical Committee, which will advise the National

62

Steering Committee about the need and content of such amendments in the National
Program for Organic Production.
Fig 2.8 Operational structure of NPOP

Source: NCOF, Ghaziabad

National Accreditation Body


The National Steering Committee would also function as the National Accreditation
Body. The members of the National Accreditation Body shall comprise of
representatives from Ministry of Agriculture, Ministry of Commerce and Industry,
APEDA, Coffee Board, Spices Board and Tea Board. Recently, three more agencies
(Coconut Board and Directorates of Cashew and Cocoa Development) were also
included as representatives in this body. The Chairman of the Body shall be the
Chairman of the National Steering Committee. The work of the National
Accreditation Body will include: (a) Drawing up procedures for evaluation and
Accreditation of certification programmes (b) Formulating procedures for evaluation
of the agencies implementing the programmes and (c) Accreditation of inspection

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and certification agencies. Every certifier will implement a certification program and a
program cannot be accredited without accrediting the certifier.

Evaluation Committee
Eligible Inspection and Certification Agencies implementing certification programmes
will be evaluated by an Evaluation Committee. The Evaluation Committee will be
appointed by the National Accreditation Body. The members of the Evaluation
Committee comprised of members drawn from the APEDA, Coffee Board, Spices
Board, Tea Board, Ministry of Agriculture and Export Inspection Council of India
(EIC) / Export Inspection Agencies (EIAs). APEDA, on behalf of the National
Accreditation Body, will receive and screen applications from the certification
agencies, will coordinate and arrange evaluation visits etc to ascertain the
credentials of certification programmes of the applicants. The Evaluation Committee
will submit its recommendations to the National Accreditation Body for considering
accreditation.
Accredited Inspection and Certification Agencies
Based on the recommendations of the Evaluation Committee, eligible Inspection and
Certification Agencies will be accredited by the National Accreditation Body. These
agencies should be well versed with the operating procedures, the NSOP and the
international standards. Their programmes should have been in operation for at least
one year and they should be able to provide the supporting documents.

Inspectors
The inspectors, appointed by the accredited Inspection and Certification Agencies
will carry out inspection of the operations through records maintained by the
operators as per specified formats and also by periodic site inspection. Based on
compliance with the standards and certification programmes, accredited Inspection
and Certification Agencies will certify the organic status of products and operations,
specifying their conditions and recommendations.

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National Project on Organic Farming (NPOF)


In 2000, Ministry of Agriculture also set up a task force on organic farming under the
chairmanship of Kunwarjee Bhai Yadav. Based on their recommendations, the
Department of Agriculture and Cooperation, Ministry of Agriculture, Govt. of India
has launched a Central Sector Scheme National Project on Organic Farming during
Xth Five year plan on pilot basis with an out lay of Rs.57.05 crore w.e.f. 1st October,
2004. The scheme is continuing in XIth Five year plan with an allocation of Rs.150
crore. Main objectives of this scheme are as follows:1. Capacity building through service provider
2. Financial support to different production units engaged in production of biofertilizers, compost, vermi-compost etc.
3. Human Resource Development through organizing training on certification
and inspection, production and quality control of organic inputs, training of
extension officers / field functionaries, farmers training on organic farming etc.
4. Field demonstration on organic inputs and enriched biogas slurry
5. Setting up of model organic farms
6. Market development for organic produce
7. Development of domestic standards
8. Support to new initiatives on technology related to organic farming
9. Awareness programmes etc.
10. Quality Control of various Bio-fertilizers and Organic fertilizers as per Fertilizer
Control Order (FCO)
Operational structure
National Project on Organic Farming is being operated by the Integrated Nutrient
Management Division of Department of Agriculture and Cooperation, GOI, and is
headed by Joint Secretary (INM). The project objectives are being implemented and
monitored through National Centre of Organic Farming (NCOF) at Ghaziabad as
Head quarter with its six Regional Centers of Organic Farming (RCOF) located at
Bangalore, Bhubaneshwar, Hisar, Imphal, Jabalpur and Nagpur.

65

Operational guidelines
Approved components are being implemented through National and Regional
Centers of Organic Farming, through various State Govt Departments and agencies
and through various Non-Government Agencies (NGOs). Details of operational
methodologies for different components are as follows:
1. Capacity building through Service providers Govt and non-government
agencies, capable of forming farmer groups and well versed with certification system
and internal control system management are being provided funds to convert 1500
farmers per group to organic, provide necessary technical support for optimum
productivity and facilitate certification through grower group certification process.
2. Financial support to input production units Financial support restricted to
25% of total financial outlay is being provided for the establishment of (i) Vegetable
market waste compost, (ii) Bio-fertilizers and (iii) Vermiculture hatcheries. Nongovernment agencies, companies, entrepreneurs and individuals can avail the facility
through credit linked back ended subsidy scheme. Loan can be availed from any
scheduled bank and subsidy is reimbursed by NABARD or NCDC. Government and
semi government bodies (including municipalities) can avail the subsidy directly by
application to Department of Agriculture and Cooperation. Maximum ceiling of
financial assistance is Rs. 40 lakh, Rs. 20 lakh and Rs. 1.5 lakh for Market waste
compost, bio-fertilizers and vermiculture hatcheries respectively.
3. Training Four different types of trainings, with different course contents are
being arranged under NPOF through NCOF, RCOF and various government and
non- government agencies. These are: (i) Training for inspection and certification
agencies and service providers, (ii) Training on production and quality control of
organic inputs, (iii) Training for field functionaries and extension officers on organic
management and (iv)Training for farmers on organic farms.
4. Demonstrations Field demonstrations-cum-farmer fairs on (i) organic inputs
and (ii) enriched biogas slurry are being organized through NCOF, RCOF and
various government and non-government agencies to prove the potential of organic
management systems and different quality organic inputs.

66

5. Model organic farms It is proposed to establish large number of model organic


farms on government and government institutions farms for demonstration of
organic packages, development organic systems and production of organic seeds.
6. New Initiatives and market Development Under the component funds are
being provided to various

government and non-government agencies for

development of packages, evaluation of organic practices, development of market


linkages and marketing initiatives. Funds are also being provided for documentation
of practices and technologies and publicity of proven technologies.
7. Awareness creation Funds are also being provided to NCOF, RCOF and
various government and non-government agencies for organization of international/
national seminars, conferences, workshops, exhibitions etc and publicity through
print and electronic media for mass awareness creation
Specific activities of NCOF and RCOFs
Besides, organization of trainings, ensuring implementation, monitoring and technical
support to implementation agencies NCOF and RCOFs are also entrusted with some
specific responsibilities, these include:
1. To collaborate all stakeholders of organic farming in the country and abroad
and act as main information centre on various aspects of organic farming
2. Documentation of indigenous knowledge and practices, compilation of
integrated organic packages and publication of technical literature in all the
languages
3. Preparation and publication of uniform and authentic training literature and
training course contents
4. Publication of Bio-fertilizers and Organic Farming Newsletters for national and
international updates on quarterly and half yearly basis
5. To provide necessary technical assistance to production units for quality
production of various organic inputs such as bio-fertilizers, composts etc.
6. To serve as data collection centre for bio-fertilizers and organic fertilizer
production, bio-fertilizer and organic fertilizers production units and their
production capacities and for details on total area under certification and
various crops being grown under organic management
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7. To maintain National and Regional culture collection bank of bio-fertilizer


organisms for supply to production units
8. Development, procurement and efficacy evaluation of bio-fertilizer strains and
mother cultures.
9. To act as nodal quality control laboratory for analysis of bio-fertilizers and
organic fertilizers as per the requirement of Fertilizer Control Order.
10. To provide all sorts of technical assistance to implementing agencies for
successful implementation of project targets.
11. Receiving, processing, evaluation and monitoring of project proposals,
ensuring implementation of sanctioned components and surveillance on
implementing agencies

Summary of achievements so far under NPOF


Under NPOF Department of Agriculture and Cooperation, Govt of India, has initiated
systematic promotion of organic farming in the country in a project mode in specified
areas. The summary of achievements of NCOF under NPOF is presented in table
2.20.
Table 2.20 Promotional activities taken up under NPOF

Source: NCOF, Ghaziabad

More than 400 Government and Non-Government agencies are working under the
project. More than 300 farmers groups, each comprising of about 1500 farmers have
started functioning to bring about 200,000 ha land under organic certification
process. With support to many organic production units a capacity has been created

68

to produce about 5000 MT of vegetable market waste compost, 3000 MT of biofertilizers and 78,000 MT of earthworm culture. 1848 trainings organized under the
project have benefited more than 37,000 trainers, extension professionals and
farmers. Besides above more than 4100 demonstrations have been conducted and
support has been provided for the establishment of 232 model organic farms through
out the country (NCOF, Ghaziabad)
Certification and product labelling
Being able to put the word "organic" on a food product is a valuable marketing
advantage in today's consumer market. Certification is intended to protect
consumers from misuse of the term, and make buying organics easy. However, the
organic labelling made possible by certification itself usually requires explanation. In
many countries organic legislation defines three levels of organics. Products made
entirely with certified organic ingredients and methods can be labelled "100%
organic". Products with 95% organic ingredients can use the word "organic". Both
may also display organic seal. A third category, containing a minimum of 70%
organic ingredients, can be labelled "made with organic ingredients". In addition,
products may also display the logo of the certification body that approved them.
Products made with less than 70% organic ingredients can not advertise this
information to consumers and can only mention this fact in the product's ingredient
statement.
Certification around the world
Organic standards are formulated and overseen by the government in some
countries. The United States, the European Union and Japan have comprehensive
organic legislation, and the term "organic" may be used only by certified producers.
In countries without organic laws, government guidelines may or may not exist, while
certification is handled by non-profit organizations and private companies.

EU countries acquired comprehensive organic legislation with the implementation of


the EU-Eco-regulation 1992. Certification is handled on the national level. In the
United Kingdom, organic certification is handled by a number of organizations, of
which the largest are the Soil Association and Organic Farmers and Growers. All the
certifying bodies are subject to the regulations of the UK Register of Organic Food

69

Standards (UKROFS), which itself is bound by EU legislation. In Sweden, organic


certification is handled by the private corporation KRAV.

In the US, the National Organic Program (NOP), was enacted as federal legislation
in Oct. 2002. It restricts the use of the term "organic" to certified organic producers
(excepting growers selling under $5,000 a year, who must still comply and submit to
a records audit if requested, but do not have to formally apply). Certification is
handled by state, non-profit and private agencies that have been approved by the
US Department of Agriculture (USDA).

In Canada, the government has published a national organic standard, but it is a


guideline only; legislation is in process. Certification is provided by private sector
organizations. In Quebec, provincial legislation provides government oversight of
organic certification within the province, through the Quebec Accreditation Board
(Conseil D'Accrditation Du Qubec). In Japan, the Japanese Agricultural Standard
(JAS) was fully implemented as law in April, 2001. This was revised in November of
2005 and all JAS certifiers were required to be re-accredited by the Ministry of
Agriculture.

In Australia, the Australian Quarantine and Inspection Service (AQIS) is the


controlling body for organic certification because there are no domestic standards for
organic produce within Australia. Currently the government only becomes involved
with organic certification at export, meaning AQIS is the default certification agency.
Although there is no system for monitoring the labeling of organic produce sold
within Australia, this primarily affects the retail public. Commercial buyers for whom
this is an issue have simply taken the export system as a de facto standard and are
willing to pay premium prices for produce from growers certified under the National
schemes. The largest importer of Australia's organic produce (by weight) is Japan
(33.59%), followed by the UK (17.51%), France (10.51%), and New Zealand
(10.21%). The largest certifier of organic products is Australian Certified Organic,
which is a subsidiary of Biological Farmers Australia, the largest organic farmers'
collective in the country.

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In China, the China Green Food Development Center awards two Standards: A and
AA; while the former standard does permit some use of synthetic agricultural
chemicals, the latter is more stringent.

Internationally, equivalency negotiations are underway, and some agreements are


already in place, to harmonize certification between countries, facilitating
international trade. There are also international certification bodies, including
members of the International Federation of Organic Agriculture Movements (IFOAM),
the Organic Crop Improvement Association (OCIA), and Ecocert. Where formal
agreements do not exist between countries, organic product for export is often
certified by agencies from the importing countries, who may establish permanent
foreign offices for this purpose.
Certification in India
In India, Agricultural Processed Foods Export Development Authority (APEDA)
under Ministry of Commerce is the controlling body for organic certification for
export. Till date there are no domestic standards for organic produce within India.
Currently 18 certification agencies (see table 2.18) have been authorized to
undertake certification process under National Programme for Organic Production
(NPOP). Although there is no system for monitoring the labeling of organic produce
sold within India, this primarily affects the retail public. Commercial buyers for whom
this is an issue have simply taken the export system as a de facto standard and are
willing to pay premium prices for produce from growers certified under the NPOP.

The regulation aimed to help domestic organic producers to overcome international


trade barriers and reach a level playing field. Yet Indian regulation does not simplify
the requirements for Indian exporters, nor does it reduce the costs. Agricultural
products from India can be marketed as organic within the European Union (EU)
under two exporting options for third countries: Equivalence Granted and Imports
Granted. Under the first option organic products can be exported if their production
and inspection systems are considered as equivalent to those of the EU. That means
India has to be recognized as having equivalent standards to those in the EU as
defined in EU Regulation 2092/91. Secondly, since Indian local certifiers are not
recognized by the EU, certification has to be issued by an EU approved certification
71

body (by law already approved by the control authority in the EU importing country).
Further, exporters in third countries are not allowed to apply directly for import
authorization. So, Indian exporters have to depend on importers in individual EU
member states to obtain special import permits from their respective EU control
authorities. Moreover, import permits are issued for a defined period either for
specific products or product groups from a given EU country. This operates as
technical barriers to trade and increases transaction costs, continuing to hamper
international trade. Recently, Indias request to EU resolution for its inclusion in the
third countries approved list has been approved. India has also been recognized for
conformity assessment by USDAs NOP.

Participatory Guarantee Scheme (PGS)


Today, Third Party Certification systems have become the dominant means of
organic guarantee for world trade and Indian producers have a number of respected
and accredited Third Party Organic Certification agencies to choose from. While, it is
an essential component to world trade, there are downsides to the system. The
inherent expense and paperwork required in a multilevel system discourages most
small organic producers from being certified at all. This limits local and domestic
trade as well as access to organic products. Worse yet, it limits the growth of the
organic movement as a whole.

Researchers have noted that the rapid increase in organic sales and certified
acreage around the world is not matched by an equal rate of growth in the number of
organic farms as might be expected. In Europe and much of the US, there is an
ironic decrease in the number of certified producers even as total organic acreage
and market sales continue to explode. (Eurostats Statistics in Focus, Agriculture and
Fisheries, 31/2005 and University of California, Davis, pre-published report, 2006).
The result is? Big agribusiness farms are benefiting from certified organic status and
market premiums more than the small scale producers that could most use these
benefits. In an attempt to reduce the inequality of this trend, a number of alternative
methods to guarantee the organic integrity of products have been developed for
small domestic producers, and they are growing rapidly. Thousands of small scale

72

producers now associate themselves with these alternatives programs, which are
now collectively referred to as Participatory Guarantee Systems (PGS).

The Ministry of Agriculture, Government of India and FAO have undertaken a


technical cooperation program for promotion of organic agriculture. One of the
important components of this program is to explore and develop PGS as a means of
organic guarantee for products produced and consumed within India. In 2006, the
first PGS model for India was developed based on existing models around the world.
It especially borrowed and built on the strengths of existing successful PGS
programs in Brazil, New Zealand and the United States (see fig 2.9).

An effective Organic Guarantee System for India needs to address the issue of
educating farmers as to the depth of what it means to be truly organic so that they
can make a choice to farm organically or not. Such a guarantee needs to be
affordable and easily accessible. It also needs to be as inclusive as possible so that
every farmer that wants to make an informed, educated choice to be organic can do
so and know that they are part of an important worldwide movement in agriculture
today (Khosla, 2006).

Fig 2.9 Key groups involved in PGS process

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Institute for Integrated Rural Development (IIRD), Maharashtra


Though there are obvious benefits of organic cultivation and consumption, the small and marginal
farmers face a challenge to guarantee their produce as organic in local and domestic markets. The
third party certification process to guarantee organic produce involves exhaustive documentation
and high costs which are beyond the capacity of the small farmers. As an alternative, a community
based certification with local standards was pioneered by Dr. Alexander Daniel of Institute for
Integrated Rural Development (IIRD), Aurangabad and implemented in Paithan Taluka of
Maharashtra since 1998. This system called as Participatory Guarantee System (PGS) involves
the farmers themselves in guaranteeing their produce as organic as per the norms and standards
defined by the local group of farmers. The marketing of such produce is based on mutual trust and
cooperation between consumers and producers and thus is more applicable for local and domestic
marketing. This system is being implemented in different parts of the country as an alternative to
the formal third party certification which benefits the small and marginal farmers.
IIRD involves in promoting organic agriculture as one of its main agenda and has promoted
organic agriculture through awareness programmes, training of farmers, community action
programmes on organic agriculture, networking with like minded organizations and lobbying
nationally and internationally for organic agriculture. For its outstanding contribution to ecocentered development, IIRD received the international Sustainable Agriculture and Rural
Development (SARD) award
(Source: www.iird.org.in)

PGS is a certification system for the whole farm, allowing farmers to sell all the crops
from the farm as certified organic. It empowers the farmer by putting them in control
as key decisionmakers of who is and isnt certified in their own local group. This
means increased responsibility, but encourages social control as an important
compliance mechanism. PGS is the only way to certify millions of small Indian
farmers in a short amount of time, bringing them into a system of committed organic
production. There is no way to fund the time or resources necessary to do that within
ICS. On a global level there are three overall major issues which need consideration
for a future successful development of PGS as a part of a credible organic guarantee
system (Kallander, 2007) are: how to assist groups in setting up and developing a
PGS, Recognition by government legislations and how to get the international
recognition of PGS without losing its core principles and key features.
Growing certified area
Before the implementation of NPOP during 2001 and introduction of accreditation
process for certification agencies, there was no institutional arrangement for
assessment of organically certified area. Initial estimates during 2003-04 suggested
that approximately 42,000 ha of cultivated land were certified organic. By 2005 India
had brought more than 2.5 million ha of land under certification. Out of this while
cultivable land was approximately 76,000 ha remaining area was forest land for wild

74

collection. Growing awareness, increasing market demand, increasing inclination of


farmers to go organic and growing institutional support has resulted into more than
200% growth in total certified area during the last two years. State wise area brought
under certification process during 2005-06 and 2006-07 are given in table 2.21.
Table 2.21 Total Area under organic certification process (certified and under
conversion) during the year 2005-06 and 2006-07

Source: NCOF, Ghaziabad

Decreasing cost of certification


Prohibitively high cost of certification had always been a matter of concern for small
and marginal farmers. But with the increasing competition, increasing number of
producers and introduction of Grower Group Certification (GGC) system, per farmer
costs have reduced drastically. The costs which were ranging from 1.5 to 2.0 lakh
per individual project and Rs. 500 to 2500 per farmer in groups have come down to
Rs. 45,000 to 75,000/- in case of individual projects and Rs. 100-150/- per farmer in
groups. Recently, initiatives taken up by Government of India to promote State
Government bodies as certification agencies has further reduced the prices.

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Recently, the Uttarakhand State Organic Certification agency has started certification
at a price of Rs. 10,000 to 15,000/- per project for encourage for farmers in the state.

Conversion standards
Organic agriculture means a process of developing a viable and sustainable agroecosystem. The time between the start of organic management and certification of
crops and/or animal husbandry is known as the conversion period. The whole farm,
including livestock, should be converted according to the standards over a period of
three years.

Yields in irrigated farms may go down in the conversion period because yields are
boosted by artificial fertilizers and on conversion soil fertility takes some years to
increase. After that, yields are equal or even higher than during the conventional
period. In rain-fed farming the situation is different. Yields here are significantly lower
and thus the difference in yields between the conventional and conversion period is
less. One of the basic constraints is the lack of governmental subsidies or support to
make conversion to organic status easier or cheaper, as in the European Union and
the United States. The conversion period can be very costly owing to the initial loss
of yields and the high costs of inspection and ultimately certification, which have to
be paid during the conversion period as well. Moreover, the products under
conversion cannot be sold in the export market at a premium and normally are
restricted to the conventional market (Mahale, 2002)

The length of the conversion period depends largely on the past land use and the
ecological situation. The Indian standards prescribe that plant products produced
annually can be certified organic when the National Standards stipulations have
been met for a minimum of twelve months before the start of the production cycle,
while perennial plants (excluding pastures and meadows) can be certified organic at
the first harvest after at least 36 months of management according to the national
standards stipulations (2.2.1, National Program of Organic Production). The
accredited certifier can extend the conversion period depending on factors like past
land use and environmental conditions (2.2.2, National Program of Organic
Production).

76

Under crop production, it is stipulated that products under conversion may be sold
as Produce of organic agriculture in process of conversion, or a similar description,
when the National Standards stipulations have been met for at least twelve months.
Animal products may be sold as "product of organic agriculture" only after the farm or
relevant part of it has been under conversion for at least twelve months and provided
the organic animal production standards have been met for the appropriate time. The
certification program shall specify the length of time by which the animal production
standards shall be met. With regard to dairy and egg production, this period shall not
be less than 30 days. Animals present on the farm at the time of conversion may be
sold for organic meat if the organic standards have been followed for 12 months.
Under the chapter labelling, it is recommended: The use of in-conversion labels
may be confusing to the consumer and is not recommended. However, further on, it
is stipulated that The label for conversion products shall be clearly distinguishable
from the label of organic products (5.1.5, National Program of Organic Production).
Price structure for organic products
Often the prices expected by farmers are unrealistic. There have been many
documented examples where a non-certified organic farmer wanted a price varying
from 100-400 per cent more than comparable conventional products. A drop in the
yields is often claimed as the reason for claiming a higher price. It is important to
note that awareness rising for farmers is of equal importance as it is for consumers.
Self-claimed organic agricultural produce can only be sold in the local market. But, a
well defined organic market in the country is virtually non-existent. As for certified
organic products, the situation is quite different in the export market. If the farmer
has paid the costs for certification and thus owns the certificate and export directly,
the premium is around 50 per cent. If he owns the certificate and sells it to an
exporter, the premium is around 25-30 per cent. If he does not own the certificate,
the premium is between 15 and 25 per cent (NCOF, Ghaziabad).

Future prospects
Although India has traditionally been a country of organic agriculture, but the growth
of modern scientific, input intensive agriculture has pushed it to wall. But with the

77

increasing awareness about the safety and quality of foods, long term sustainability
of the system and only hope for rain fed resource poor farmers, the organic farming
has emerged as an alternative system of farming which not only address the quality
and sustainability concerns, but also ensure a debt free, profitable livelihood option.
With in a short span of five years organic agriculture has grown from a controversial
niche subject to a mainstream agriculture. It has grown at a rate of nearly 200% in
the last two years and is likely to grow by more than 100% in the next five years to
come. Institutional mechanisms and governmental support has ensured its sustained
growth during the 11th plan period. But to keep the hopes of these farmers, efforts
are necessary to link them to market. For this efforts need to be done on the same
scale, as has been initiated for increasing the area.

**********************

78

Chapter III
Status of Organic Input Production in India
Capital Investment Subsidy Scheme, which is the major component under National
Project on Organic Farming (NPOF) for setting up/promoting of organic input units in
India. In the present day organic farming, more stress is given on-farm management.
In this on-farm management, nutrient management and pests & disease
management are the crucial parts. The requirement of these inputs mostly gets from
own-farm resources other-wise partly from off-farm sources. The present chapter
mainly describes the importance of quality inputs, briefly about capital investment
subsidy scheme and current status of different organic inputs production in India.
3.1 Need for quality organic inputs
In promotion of organic farming, use of organic inputs has assumed greater
importance. Contrary to conventional farming where synthetic inputs are used to
feed and protect the crop by direct action, in organic farming, inputs are used to feed
the soil and to create an environment which can collectively keep the pests below
economical threshold limit (ETL). In this endeavor although quantity may not be an
important issue, but quality of input is of prime importance. In the recent years efforts
have been made to promote appropriate production methodologies among farmers
for effective conversion of organic waste into nutrient rich compost and for preparing
botanical extracts for pest management. Mass adoption of vermi-compost
technology and use of Neem seed kernal sprays by farmers is an indicative of the
usefulness of such strategy. But still there is a scope for the entrepreneurs to come
forward and establish production facility to produce consistent quality products and
made available to farmers at reasonable prices. To take the advantage of growing
awareness of organic agriculture, various types of organic and biological inputs have
been launched and are being sold to farmers. Most of such products are the results
of research, but some are promoted without much scientific validity. To prevent such
adulterated practices, awareness among the farmers is most essential. At
government level, efforts have been taken to regulate the production and quality
control of some organic inputs through Fertilizer Control Order (for composts and
bio-fertilizers) and Central Insecticide Act (for manufacture and sale of biopesticides) (NCOF, Ghaziabad).

3.2 Capital incentive subsidy scheme for promotion of organic inputs


The critical component of organic farming is availability of organic inputs. Organic
manures are an important input for promotion of organic farming as well as for
Integrated Plant Nutrient Management (IPNM) in traditional farming. Accordingly,
capital investment subsidy scheme for commercial production units for organic inputs
under NPOF has been introduced since October, 2004 with the following objectives:
a. To promote organic farming in the country by making available the organic
inputs such as bio-fertilizers, vermi-compost and fruit & vegetable waste
compost and thereby better return for the produce;
b. To increase the agricultural productivity while maintaining the soil health and
environmental safety;
c. To reduce the total dependence on chemical fertilizers by increasing the
quantum of quality bio-fertilizers / compost availability in the country;
d. To set up hatcheries for vermin-culture so that the demand of enough
earthworm population for on farm production of vermi-compost can be met
with;
e. To convert the organic waste in to plant nutrient resources; and
f. To prevent pollution and environment degradation by proper conversion and
utilization of organic waste

New as well as existing units (for expansion / renovation) engaged in the production
are eligible under the scheme. For setting up of organic input production units,
financial assistance is being provided as credit-linked and back-ended subsidy
through National Bank for Agriculture and Rural Development (NABARD) and
National Cooperative Development Corporation (NCDC). The financial assistance for
setting up the following types of organic input units are:
1. Fruit/vegetable and agro-waste compost production units of 100 TPD
capacity with financial assistance @ 25% of the total project cost subject
to a maximum of Rs. 40.00 lakh per unit
2. Bio-fertilizer production units of 150 TPA capacity with financial
assistance @ 25% of the total project cost subject to a maximum of Rs.
20.00 lakh per unit

80

3. Vermi culture hatcheries of 150 TPA capacity with financial assistance


@ 25% of the total project cost subject to a maximum of Rs. 1.50 lakh per
unit
The pattern of assistance will be owners contribution 25 per cent, subsidy from the
government of India 25 per cent subjected to the maximum ceiling and the remaining
50 per cent as a term loan from the bank. The rate of interest on the loan is as
decided by the financial bank. Prescribed time limit for establishment of units and
repayment of loans under NPOF are summarized in tables 3.1 and 3.2 respectively.
Table 3.1 Time limit for establishment of units
Bio-fertilizers units

Vermiculture hatcheries

A time limit of maximum 12


months is prescribed
for
completion of the project from
the date of sanction by bank

A time limit of maximum 6


months
is
prescribed
for
completion of the project from
the date of sanction by bank

Fruit & vegetable waste


compost unit
A time limit of maximum 12
months is prescribed
for
completion of the project from
the date of sanction by bank

However, if reasons for delay are justified, a further grace period of 3 months may be
allowed by the participating bank. If the project is not completed within stipulated
period, the benefit of subsidy shall not be available and advance subsidy has to be
refunded.
Table 3.2 Prescribed time limits for repayment of loan
Bio-fertilizers units

Vermiculture hatcheries

Repayment period will depend


upon the cash flow and may be
generally up to 10 years with a
grace period of two years.

Repayment period will depend


upon the cash flow and may be
generally up to 8 years with a
grace period of one year.

Fruit & vegetable waste


compost unit
Repayment period will depend
upon the cash flow and may be
generally up to 10 years with a
grace period of two years

Refinance assistance from NABARD: NABARD releases subsidy to the units


financed by commercial banks, Regional Rural Banks (RRBs), State Cooperative
Banks (SCBs), State Co-operative Agricultural and Rural Development Banks
(SCARDBs), Scheduled Primary Urban Cooperative Banks (PUCBs), and such other
institutions eligible for refinance from NABARD.
The total subsidy amount will be released in two installments. 50 per cent of the
eligible subsidy would be released as Advance subsidy to the participating bank
upon submission of a project profile cum claim form after sanction of bank loan and

81

disbursement of first installment. The remaining 50 per cent as Final subsidy would
be disbursed to the participating bank after conduct of an inspection by the Joint
Monitoring Committee (JMC) consisting of officials from the financial bank, NABARD
and NCOF/Department of Agriculture and Cooperation (DAC) officials. No interest
should be charged on the subsidy portion by the bank. The state-wise details of
units sanctioned under NABARD as on May, 2009 are presented in table 3.3.
Table 3.3 State-wise details of input units sanctioned under NABARD
s.n
o
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21

State
Andhra
Pradesh
Assam
Bihar
Chattisgarh
Delhi
Goa
Gujarat
Himachal
Pradesh
Jharkhand
Karnataka
Kerala
Madhya
Pradesh
Maharashtra
Meghalaya
Punjab
Haryana
Rajasthan
Tamil Nadu
Uttar Pradesh
Uttarakhand
West Bengal
Total

Vermihatchery
units

Bio-fertilizer
units

Fruit and
vegetable waste
units

21
7
6
86

1
3

1
1
1
1

1
35
1

1
2

2
2

22

29
42
8
63
5
115
1
7
455

6
1
1
1
1
2
2
2
31

1
1
10

Source: Head office, NABARD (as on May, 2009)

Refinance assistance from NCDC: The Ministry of Agriculture, DAC under the
NPOF requested NCDC for setting up of 5 bio-fertilizer units in co-operative sector
with back ended subsidy @ 25 per cent of the total block cost subjected to a
maximum of Rs.20 lakh per unit. The establishment of fruit and vegetable waste
production units and vermi-culture hatcheries were not assigned to the corporation.
82

The original Total Financial Outlay (TFO) sanctioned by the bank or the actual
expenditure incurred by the promoter, whichever is less, will be reckoned for
deciding the amount of subsidy subject to verification by the Joint Monitoring
Committee (JMC). NCDC has so far sanctioned two bio-fertilizer projects through the
state government of Maharashtra. The details of these units are presented in table
3.4.

Table 3.4 Details of bio-fertilizer units sanctioned under NCDC


Sl.no

Details of the unit

1.

The Ganpati Zila Krishi Audhoyogic Sarva Seva Sahakari Society


Ltd., Vasandada Market Yard, Sangli, Maharashtra

2.

Sanjeevani Agro Products Cooperative Society Ltd., Ichalkaranji


Tal, Hatikanangale Dist, Kolhapur, Maharashtra

Basic organic input demand framework


The performance and capacity utilization of any organic input will depend on a wide
range of factors including the local area. But, a basic organic input demand
framework is depicted in fig 3.1. Basically, the demand depends up on the crops
growing in that area (irrigated/rain fed), interests of farmers (short or long term) and
market demand for organic produce. It also depends up on the organic output
premium prices and presence of output marketing channels. The timely availability of
organic inputs and existence of established input marketing channels also influence
the sales.

Fig 3.1Organic input demand framework


83

3.3 Status of organic input production


Recycling nitrogen on the farm by using manure and nitrogen fixing plants enhances
soil quality and provides nutrients. This is the predominant technique of organic and
low external input agriculture. However, timing and management of its use are
essential. Soil mineralization processes should deliver the elements to the plant at
times of peak demand. Organic and green manures as well as nitrogen from
legumes can be managed very precisely due to the design of the crop rotations
including cover and catch crops (Thorup-Kristensen, et al., 2003). In addition,
improved distribution systems, such as slurry injections into soils or drag hoses,
reduce nutrients losses considerably. All these techniques might be knowledgeintensive for farmers and require site specific adaptations. As nitrogen on organic
farms is far more costly than industrial nitrogen, there is a strong incentive to avoid
losses and to learn and implement recycling techniques (Stolze, et al., 2000).

The global potential of nitrogen availability through recycling and nitrogen fixation is
far bigger than the current production of synthetic nitrogen, as shown table 3.5.
Table 3.5 Global nitrogen input and nitrogen circuits in agriculture
Nitrogen derived from industrial production
(by the Haber-Bosch process with fossil fuel
combustion)
Potential nitrogen production by leguminous
plants via intercropping and off-season
cropping (without competing cash crops). This
potential is not used by conventional farmers.
Nitrogen from livestock faeces of 18.3 billion
farm animals (FAO, global figure). In
specialized farming structure with strong
segregation between crop and livestock
production, nitrogen from manure and slurry is
inefficiently used.

90 to 100 Mt N per
year

Erisman, et al., 2008,


IFA, 2009

140 Mt N
per year

Badgley, et al., 2007

160 Mt N
per year

Niggii et al., 2009

On-farm use of farmyard manure (a practice increasingly abandoned in conventional


production) needs to be reconsidered in the light of several problems in the
conventional farming. In addition, different forms of compost, especially composted
manure, are particularly useful in stimulating soil microbial processes and in building
up stable forms of the soil organic matter (Fliebach and Mder, 2000). Napplication rates in organic agriculture are usually 60 to 70 percent lower than in
conventional agriculture because of the recycling of organic residues and manures.

84

In addition, the limited availability of nitrogen in organic systems requires careful,


efficient management (Kramer, et al., 2006).
Indias potential
Bhattacharya and Chakraborty (2005) estimated the current status of organic
farming in India and other countries. They noticed various problems in the
conventional farming in India and opined that the integration of organic and inorganic
farming would be an ideal model. Based on their results the industrial nitrogen
fixation (INF) is 40 mt/year which accounts for only 15.3% of total nitrogen fixation.
On the other hand, the quantity of biological nitrogen fixation (BNF) is 175 mt/year
contributes for 67.3% of the total amount. Plant also uses nutrients from organic
sources through mineralization and billions of microorganisms are available in soil for
this job. Excess and indiscriminate use of inorganic fertilizer has deteriorated soil
badly with deficiency of macro and micronutrients.

India is endowed with various types of naturally available organic form of nutrients in
different parts of the country and which will help for organic cultivation of crops
substantially. According to Bhattacharya (2006) the major sources of organic inputs
in India are presented below:
Sources of organic inputs in India
Live stock
Crop residues
Biogas slurry
Bio-fertilizer
Green manure
City refuse
Others*
Total

=
=
=
=
=
=
=
=

2.47 million ton


2.00 million ton
0.12 million ton
0.20 million ton
0.10 million ton
0.68 million ton
1.00 million ton
6.57 million ton

Bio-pesticide

1000 ton

* Rural compost, vermi-compost, ag. wastes


There is enough scope for production of sufficient organic inputs in India. Almost 7
million ton of production potential currently is having through different sources.
Among different sources, livestock accounts for lion share (nearly 40 per cent). It is

85

followed by crop residues (30 per cent) and other sources (15 per cent). Other
sources include the rural compost, vermi-compost and agricultural wastes. India is
also having a huge potential of nearly 1000 tons of bio-pesticide preparations.

Ghosh (2004) analyzed the environmental benefits of possible shift in agricultural


technology, while keeping in view the importance of sustaining crop yield levels and
protecting farmers incomes. She considered two major crops i.e., paddy and
groundnut from major producing states of India and found that over time while
fertilizer use intensified several times, the use of manure in agriculture either
stagnated or declined. Quadratic yield functions were fitted on cross-section
household level data by using prices faced by farmers as reported by official surveys
and found that in majority of the cases there will not be any financial loss resulting
from a small shift in technology towards organic manure. The interactions between
the two inputs vary but a synergic effect dominated for paddy. But substitution of
organic manure for chemical fertilizer seems technically possible to protect yield
levels and simulations suggested that a shift towards manure from fertilizer on the
whole may not hurt income in most cases. However since the effect differs by
households and depends on the response of manure price to increased use, the shift
can be practicable if losing households are protected or compensated by policy and
by promoting a more dynamic manure market to control manure prices. Higher
premiums on output prices if possible in a market for a product embodying a more
sustainable technology could be another way in which farm incomes can be
protected.

Installed capacity of compost/vermi-compost units


The state-wise details of organic manure production units sanctioned under different
state and centre governmental schemes are summarized and presented in table 3.6.
The units sanctioned under NPOF subsidized scheme are not included in the table.
Since most of the states have not submitted the data, it was denoted as 0. The
state-wise number of units established and their installed capacities respectively
under NADEP compost, vermi-compost and other compost types are summarized in
the table. The total no.of NADEP compost units built across India was 248622. The
total installed capacity of these units was 18.704 lakh metric tons. The average
installed capacity of each NADEP compost pit was around 7.5 ton. Nearly, 72 per
86

cent of the units were established in Madhya Pradesh state followed by U.P (24 per
cent). 178564 units of vermi-compost units were sanctioned across under different
state and centre government schemes. The estimated installed capacity of these
units was 32409.2 lakh metric tons. Due to some inconsistency in the production
data, we are not attempting any further calculations. The lion share of these were
sanctioned in U.P (33.3 per cent) followed by Rajasthan (26 per cent). The total
number of other compost units approved under these schemes was 232730. The
additional capacity created under these units was 15.2 lakh metric tons. The mean
capacity of a single unit was approximately 6.5 ton. Nearly, 68 per cent of these units
were approved in Karnataka state followed by Maharashtra (27 per cent).
Table 3.6 State-wise details of organic manure production units, 2007-08*

* Units funded under state and central governmental financial assistance schemes, excluding the
units subsidized through NPOF
Source: NCOF, Annual Report, 2007-08

87

Status of compost/vermi-compost production


The state-wise details of compost/vermi-compost production and area covered by
them are presented in table 3.7. The production details were categorized in to five
types i.e., rural compost, urban compost, FYM, vermi-compost and other composts.
The total production of rural compost at all India level was 1693.2 lakh ton. The total
area covered by these units was 697.4 lakh ha.

Table 3.7 State-wise details of compost/vermi-compost production, 2007-08*

* based on the inputs provided by different state government during Oct, 2008
Source: NCOF, Annual Report, 2007-08

Among different states, the maximum production (60%) and area (73%) was covered
under Karnataka state. In case of urban compost, the cumulative total production
was 152.6 lakh ton. The covered area was only 76.2 ha. The total urban compost is
only accounted for 9 per cent share in the total rural compost production. Between
different states, Karnataka occupied the lion share in the total. The total production

88

and coverage of area under farm-yard manure units was 1862 lakh ton and 864.6
lakh ha respectively. The average application rate per ha was 2.15 ton. Again
Karnataka is on the top list when compared with other states. The total production of
vermi-compost from all the states was 30.9 lakh tons. Approximately 12.63 lakh ha
area was covered by these units. Almost half of the production and area was
covered in Karanataka alone. The average application was 2.44 ton per ha. In case
of other compost units, the total production made by them was 92.0 lakh tons with an
area coverage of 43.8 lakh ha. The average application of this compost was 2.1 ton
per ha. Karnataka state secured the major share both in production and area
coverage.
Status of green manure production
The status of green manure production across different states is presented in table
3.8. Incorporation of green manure improves the soil physical characteristics as well
as fixes the biological nitrogen significantly. The total green manure production at the
all India level was 133.5 lakh metric tons with 13.0 lakh ha area coverage. The major
green manure producing states were Uttar Pradesh followed by Chattisgarh and
Tamil Nadu. But, more 50 per cent of the total area was covered in Karnataka.

Table 3.8 Status of green manure production across different states, 2007-08

Source: NCOF, Annual Report, 2007-08

89

Status of bio-fertilizer production


The details of production of bio-fertilizers between 2004-05 and 2007-08 are
presented in table 3.9. Various types of bio-fertilizers are being produced by many
producers in the country. Among these, Rhizobium, Azotobacter, Azospirillum and
PSB are most predominant ones. The production and growth of different biofertilizers between the years 2004-05 and 2007-08 is the indication of increased
awareness of farmers regarding use of bio-fertilizers in the country. Among different
bio-fertilizers, the production of PSB is highest followed by Rhizobium, Azospirillum,
Azotobacter, and Acetobacter during 2007-08. But, when we compare with base
year, 2004-05; the highest growth was observed in case of Azospirillum followed by
Rhizobium and Azotobacter.
Table 3.9 Production of different bio-fertilizers, 2004-05 to 2007-08 (tons)
Type

Production
2007-08
3360.8

% change

Azotobacter

Production
2004-05
1790.18

Azospirillum

871.21

2944.5

+227.9

Acetobacter

92.08

Rhizobium

1188.35

2825.8

+137.7

PSB

6653.01

10675.9

+60.4

Others*

12071.1

18821.6

+55.9

Total

22665.9

38932.6

+71.7

+87.7

* Others includes compost enriches (Trichoderma, Paceliomyces etc), PGPRs, BGA etc
Source: NCOF, Annual Report, 2004-05 and 2007-08

Installed capacity and current utilization


The details of state-wise installed capacity and production of bio-fertilizers are
summarized in table 3.10. According the information gathered by NCOF /RCOFs
there are 164 bio-fertilizer units existing in the country. But, besides these there may
be many private units, State Agri. Labs and SAUs and other agencies which also
producing bio-fertilizers. However, the production figures of such units were not
included in the present table. During the year 2007-08, the details about installed
capacity and current production were collected from all 164 units. The total installed

90

production capacity of all the units was 67162 tones. But, the actual production
during 2007-08 was only 38932.6 tones. It accounts for nearly 58 per cent of their
total capacity utilization. Among different states, the highest installed capacity was
observed in case of Karnataka (nearly 40 per cent) followed by Tamil Nadu (19 per
cent). The lowest installed capacity was indicated in case of Punjab. But, their
shares in the total production was the highest in case of Tamil Nadu (28 per cent)
followed by Karnataka (22 per cent). Across different states, the highest capacity
utilization was noticed in case of Pondicherry (189.2 per cent). These results
conclude that there is ample scope for further increase in production of bio-fertilizers
in the country. The table 3.10 also reveals that most of the installed capacity and
production was concentrated only in southern states. There is a huge untapped
potential in case of north and north eastern states.
Table 3.10 State-wise installed capacity and production, 2007-08 (tons)

* Others includes compost enriches (Trichoderma, Paceliomyces etc), PGPRs, BGA and Azolla
Source: NCOF, Annual Report, 2007-08

91

Scenario of bio-fertilizer production across different states


The scenario of bio-fertilizer production across different zones and states is
presented in table 3.11.
Table 3.11 Scenario of bio-fertilizer production in India, 2003-04 to 2007-08 (tons)

Source: NCOF, Annual Report, 2007-08

The total production of bio-fertilizers in the country has increased from 9798.8 ton to
20111.0 tons between 2003-04 and 2007-08. It registered a growth of more than 100
per cent. It shows that the demand about bio-fertilizers in the country is increasing at
the rate of 20 per cent per annum. In absolute terms, the demand has increased
significantly in south zone when compared to other zones. The demand was almost
stagnant in case of west and north east zones. Among different states, the highest
92

growth in production was observed in Andhra Pradesh from 205 tons to 4515.8 tons
during the study period.
Different types of bio-fertilizer production across states
The information about different types of bio-fertilizer production across states is
presented in table 3.12.
Table 3.12 Different types of bio-fertilizer production across states, 2007-08 (tons)

* Others includes compost enriches (Trichoderma, Paceliomyces etc), PGPRs, BGA and Azolla
Source: NCOF, Annual Report, 2007-08

The total production of bio-fertilizer was the highest in case of Tamil Nadu when
compared to all other states. The next highest production was observed in Karnataka
followed by Andhra Pradesh and Kerala. All four south states accounted for almost
73 per cent of total countrys production. The results clearly indicate that the
awareness and usage of bio-fertilizers was higher in south zone farmers than any
other zone. Among different types of bio-fertilizers, the share of PSB in the total
production was higher. The production of Azotobacter was high in case of

93

Maharashtra where as the manufacturing of Azospirillum was high in Tamil Nadu.


The demand for Rhizobium as well as PSB was higher in Andhra Pradesh.
Status of bio-pesticides production
The status of bio-pesticide production in India is still in infant stage. Most of organic
farmers are using botanical extracts like neem oil/ leaves, calotropis, green chillies,
garlic etc for controlling the pests and diseases. Cow urine and fermented curd water
are the other substances using with traditional knowledge. Application of biopesticides such as Trichoderma, Pseudomonas, Beauvaria and Verticillium are
limited. Farmers are either dependent on Agricultural Universities /research stations
or private companies for bio-pesticides. The database about these organic input
production is not available or yet to be organized. Very few private companies have
started commercial production of bio-pesticides in limited scale. But, their production
statistics is not publicly available.

Overall, the scenario of organic input production in India is slowly gaining momentum
with the increased awareness of the farmers. Role of government plays an important
role for further expansion of organic farming in India. Establishment of organized
input market channels, encouragement of organic input usage by subsidization and
conduct of more awareness/training programs about them would enhance the
demand for organic input production in India.

********************

94

Chapter IV
Productivity and Efficiency of Organic input units in India
The present chapter highlights the productivity and efficiency of organic input (mainly
vermi-hatchery) units sanctioned under NPOF scheme. This chapter begins with
description of analytical framework, brief review of literature, specification of model,
sampling strategy and finally ends with empirical results. It also covers the various
issues like impact of subsidy on efficiency, factors influencing efficiency, constraints
in establishment of organic inputs units and suggestions for promoting organic
inputs.

4.1 Analytical framework


Productivity growth and the use of additional inputs are the two major forces behind
increased agricultural production. Productivity has two major components: a)
technical change, and b) technical efficiency (Good et al., 1993). Efficiency is a very
important factor of productivity growth especially in developing agricultural
economies, where resources are scarce and opportunities for developing and
adopting better technologies have lately and dwindling. Such economies can benefit
a great deal from inefficiency studies which show that it is still possible to increase
production and productivity by improving efficiency, a usually neglected source of
productivity, without increasing the resource base or developing new technologies.
Estimates of efficiency can also help to decide whether to improve efficiency or to
develop new technologies to raise productivity (Sharma and Sharma, 2002).
The two concepts commonly used to characterize a firms resource utilization
performance are (1) productivity, and (2) efficiency. These two concepts are often
treated as equivalent in the sense that if firm A is more productive than firm B, then
it is generally believed that firm A must also be more efficient. But, this is not always
true. Although closely related, they are fundamentally different concepts. Productivity
is a descriptive measure of performance and efficiency, on the other hand, is a
normative measure (Subhash, 2004).

Measuring productivity is quite simple when only a single output is produced with a
single input. In this case, output per unit of input is a comprehensive measure of the

level of productivity and it can be used in comparing the performance firms or


industries. However, it is a little bit more complex when multiple outputs are
produced using multiple inputs. In this case, productivity is often measured using
partial productivity measures such as output per worker or per hour worked or output
per hectare. Though commonly used, partial productivity measures are of limited use
and can potentially mislead and misrepresent the performance of a firm. So,
productivity is essentially a level concept and measures of productivity can be used
in comparing performance of firms at a given point of time. In contrast, productivity
change refers to movements in productivity performance of a firm or an industry over
time (Coelli et al., 2005).

Efficiency of firm is measured in terms of its relative performance-that is, efficiency of


a firm relative to the efficiencies of firms in a sample. A formal econometric approach
for estimating relative efficiency is with reference to the best practice frontier. Best
practice frontier, a term originally coined by Farrell (1957) denotes maximum output
that can be obtained with a given set of input quantities for a given set of firms in a
sample. He also proposed that the efficiency of a firm consists of two components:
technical efficiency, which reflects the ability of a firm to obtain maximum output from
a given set of inputs, and allocative efficiency, which reflects the ability of a firm to
use the inputs in optimal proportions, given their respective prices and the production
technology. These two measures are then combined to provide a measure of total
economic efficiency. The output and input perspective will coincide when measuring
technical efficiency under Constant-Return-to-Scale (CRS). The allocative and
economic efficiency measures however are completely different in nature and are
not likely to coincide for other reasons than by chance. Further more, the
observations of Farrell input-and output-orientated technical efficiency measures are
equivalent to the input output distance functions, discussed in Shephard (1970) and
Fare and Primont (1995).

So far, we have discussed the efficiency of operations of a firm with respect to the
production technology frontier at a given level of input and output prices. It is
possible that a firm is both technically and allocatively efficient but the scale of
operation of the firm may not be optimal. Suppose the firm is using a VariableReturn-to-Scale (VRS) technology, then the firm involved may be too small in its
96

scale of operations, which might fall within the Increasing-Return-to-Scale (IRS) part
of the production function. Similarly, a firm may be too large and it may operate
within the Decreasing-Returns-to-Scale (DRS) part of the production function. In both
of these cases, efficiency of the firms might be improved by changing their scale of
operations, i.e., to keep the same input mix but change the size of operations. If the
underlying production technology is a globally Constant-Returns-to-Scale (CRS)
technology then the firm is automatically scale efficient. Fare, Grosskopf and Roos
(1998) presented a definition of scale efficiency and use it in deriving a
decomposition of productivity change over time. Balk (2001) provided a formal
framework to define scale efficiency and to study the role of scale efficiency in
productivity change. Balk then compared and evaluated some of the earlier attempts
in the literature (Fare et al, 1994; Ray and Desli, 1997; Grifell-Tatje and Lovell, 1999;
Wheelock and Wilson, 1999; and Zofio and Lovell, 1999) to decompose productivity
change into efficiency change, technical change and scale change.

Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA)


techniques are commonly used tools to measure firm/farm level inefficiencies.
Techniques like index number methods, which implicitly assume that all firms are
fully efficient. Now, we relax this assumption and used to estimate frontier functions
and measure the efficiencies of firms relative to these estimated frontiers. Frontiers
have been estimated using many different methods over the past 40 years. Lovell
(1993) provided an excellent introduction to this literature. DEA which involves
mathematical (non-parametric) programming where as SFA uses econometric
(parametric) methods for measuring firm level efficiencies.

4.2 Brief review of literature


4.2.1 Measurement of firm efficiency and its determinants
Parameswaran M. (2002) analyzed the performance of the manufacturing firms in
some selected industries in terms of their technical efficiency against the background
of the industrial and trade policy reforms introduced in India since 1991. Stochastic
frontier production function and associated inefficiency model were used to measure
time varying firm specific technical efficiency. He defined technical change as the
shift of the best practice production frontier and technical inefficiency change as the
movement within the best practice technology. The results showed that all the
97

industries considered registered a higher rate of technical progress in the post


reform period along with a decline in the level of technical efficiency. The effect of
change in the policy environment on technical efficiency varies among industries.
The study also found that firms involvement in the international trade through export
and import of raw materials and technology has a positive effect on technical
efficiency.

Admassie A. and Matambalya F.A.S.T (2002) examined the efficiency levels of


SMEs (Small and Medium scale Enterprises) in order to formulate appropriate
policies for their development. In this study, the level of technical efficiency of SMEs
in Tanzania has been examined using a Cobb-Douglas stochastic frontier production
function. The findings indicated that high levels of technical inefficiency, which
reduce their potential output levels significantly, characterize the Tanzanian SMEs.
Assisting those firms to improve their technical efficiency through adequate supply of
inputs, markets, and credit facilities, and undertaking extensive infrastructural
development and training could be some important measures.
Jun-Yen L. (2005) has applied stochastic frontier analysis (SFA) as well as data
envelope analysis (DEA) for measuring and comparing the technical efficiency
scores for 79 forest and paper companies. For recognizing the environmental effects
on the DEA technical efficiency scores, two-stage DEA was also applied in order to
compare any differences in the rank order. The average technical efficiency scores
were 0.788 and 0.706 by SFA and DEA, respectively. The highest average efficiency
scores, using these two methods were 0.884 and 0.919 observed in Japan,
respectively. Moreover, the lowest average efficiency scores were 0.608 and 0.396
found in Latin America. Although slight differences exist in the scores obtained from
these two methods, the highest and lowest relative efficiency ranking for forest and
paper companies remain the same. The tests of the rank order correlation were all
statistically significant among the SFA, the DEA, and the two-stage DEA methods.
The results suggested that policy makers and analysts could be ease when
employing these methods to identify the relative efficiency scores for forest and
paper companies.

98

Bhandari A.K and Subhash C.R (2007) analyzed the technical efficiency in the Indian
Textile Industry using non-parametric analysis of firm-level data. The Indian textiles
industry was at the crossroads with the phasing out of quota regime that prevailed
under the Multi-Fiber Agreement (MFA) until the end of 2004. In the face of a full
integration of the textiles sector in the WTO, maintaining and enhancing productive
efficiency was a precondition for competitiveness of the Indian firms in the new
liberalized world market. In this paper, they obtained the data from the Annual
Survey of Industries for a number of years to measure the levels of technical
efficiency in the Indian textiles industry. They used both a grand frontier applicable to
all firms and a group frontier specific to firms from any individual state, ownership, or
organization type in order to evaluate their efficiencies. This has permitted them to
separately identify how locational, proprietary, and organizational characteristics of a
firm affect their performances.

Milana C. et al (2008) estimated the firm-level analysis of the multifactor productivity


that has been recently observed in Italy. DEA technique was applied to the firm-level
data collected within the annual surveys on the economic accounts of enterprises
carried out by the Italian National Statistical Institute (ISTAT). The MFP changes
occurred during the period 1998-2004 have been measured for 25 industries and
have been decomposed into technological change (shift in the production frontier)
and change in relative technical inefficiency (due to modifications in the distance of
the single firms from the frontier). The outcome of the results highlighted stagnation
in Italian MFP trends; in particular, a decrease in MFP was registered for many
economic sectors.

Graner M. and Isaksson A. (2009) investigated the link between firm efficiency and
exports from Kenyan manufacturing units. The results showed that exporters were
more efficient than non-exporters, and relatively efficient firms self-select into
exporting. An important new finding was that only for export markets outside Africa,
firms must be efficient prior to entry; for those exporting within Africa this requirement
seems less binding. Furthermore, the probability to export to other African countries
increases if production was intense in physical and human capital, while for export
activities outside Africa firm size is more important. Contrary to many other studies, it
was also found evidence that export participation yields learning-effects. When
99

testing the hypothesis that the main source of learning-effects was trade with
developed countries (South-North), as opposed to trade with other developing
countries (South-South). Yet, another finding was that learning-effects obtained only
in South-South trade. So, the study concluded that controlling the destination of
exports importantly improves the understanding of the relationship between firm
efficiency and exports.

Kinda T. et al (2009) investigated the relationship between firm-level technical


efficiency and the investment climate for 22 developing economies and eight
manufacturing industries based on the World Bank Investment Climate Assessment
Surveys. The results showed that, on average, enterprises in the Middle East and
North Africa have performed poorly compared with other countries in the sample.
The exception was Morocco, whose various measures of firm-level productivity rank
close to the ones of the most productive economies. The analysis also revealed that
the competitiveness of countries in the region has been handicapped by high unit
labor cost, compared with main competitors like China and India. The empirical
results proved that the investment climate matters for firms' productive performance.
Depending on the industry, the efficiency was influenced by various parameters like
quality of infrastructure, the experience and education, level of the labor force, the
cost of and access to financing, as well as different dimensions of the governmentbusiness relation. The results also exhibited that some industries, exposed high to
international competition, were more sensitive to investment climate deficiencies.
Finally, these findings bear very clear policy implications on increasing firms' size
and improving the investment climate (in particular of small and medium firms and
industries more exposed to international competition) could constitute a powerful
means of industrial development and competitiveness, in the Middle East and North
Africa region in particular.

Aggrey N. et al (2010) established the relationship between firm size and technical
efficiency in East African manufacturing firms. This study used a two-step
methodology to examine the relationships. In the first step, technical efficiency
measures were calculated using DEA approach. Secondly, by using GLS technique,
technical efficiency equation was fitted to investigate the relationship between them.
Contrary to our expectation, the results showed a negative association between firm
100

size and technical efficiency in both Ugandan and Tanzanian manufacturing firms.
The existence of a positive association between size squared and technical
efficiency was observed. The negative association between them indicated an
inverted U-relationship in those countries.

Cechura L. (2010) estimated the technical efficiency in Czech agriculture with


respect to firm heterogeneity. Choice of a proper model specification, distinguishing
between technical inefficiency and firm heterogeneity and level of technical efficiency
were the two major questions analyzed in this paper. The results showed that only
those model specifications allowing for the capture of time-invariant firm
heterogeneity might provide consistent estimates of technical efficiency. Specifically,
the Random Parameters family of models was a superior specification for the
estimation of technical efficiency in the analysis. Moreover, technical inefficiency was
proved to be a significant phenomenon in Czech agriculture. The average level of
technical efficiency was around 90% for agricultural companies.

Mazumder R. and Adhikary M. (2010) have measured firm-specific time invariant


technical efficiency in the Indian automobile industry during 200406 using a suitably
constructed stochastic production frontier. The one-sided inefficiency random
variable was assumed to be truncated normal with a variable mode which was nonneutral with respect to some selected firm-specific factors, capable of explaining
inter-firm variations in the level of technical inefficiency. It was found that age of the
firm since inception and level of technical efficiency were inversely associated.
However, the market share of the firm and the degree of automation were found to
be positively associated with firm level technical efficiency. Statistical tests further
revealed that the underlying technology in the automobile industry in India was linear
homogeneous.

4.2.2 Impact of subsidy on efficiency


Emvalomatis et al., (2008) examined the relationships between subsidies on
production and technical efficiency in agriculture in case of cotton producers in
Greece. Subsidies on production have been criticized for protecting producers from
competition, and thus removing an incentive for efficient use of the resources. The
dataset used for this purpose was from the Farm Accountancy Data Network (FADN)
101

and covers the period 1996 to 2000. The stochastic frontier approach, linear fixed
effects and Monte Carlo maximum likelihood techniques were used for the
estimation of efficiency. The results indicated that compensatory area payments
reduce the efficiency scores of the producers by diverting resources from products
for which the subsidy was based on the area planted to the production of cotton and
its volume of output. Decoupled aid can be viewed by farmers as an alternative
source of income additional to the sales of cotton. Although the land and resources
which were allocated for production cereals on the contrary to cash crops. Finally,
they concluded that ignoring the presence of unobserved heterogeneity would
overstate the levels of inefficiency.

Lakner (2009) investigated the efficiency of organic milk farms in Germany and the
role of subsidies and of regional factors based on data from 1994-95 to 2005-06.
Five inputs and one output were analyzed by using a stochastic frontier production
function, allowing for heteroscedasticity and technical effects. The selection of
determinants of technical efficiency included five groups of indicators (management
capacity, farm structure, institutional choices, policy support and regional variables).
The analysis was focused on the impacts of farm support of organic farms and of
regional factors that can influence technical efficiency. Results concluded that the
farms in conversion showed lower TE scores than regular organic farms. There were
regional differences in the technical efficiency among farms. When compared to
Southern region, the milk-farms in West and Northern region were more efficient.
There was not significant difference between Eastern and Southern region farms.
The study also concluded that the farms who received agri-environmental payments
and investment aid showed lower efficiency scores.

Data Envelopment Analysis Vs Stochastic Frontier Approach

Seiford and Thrall (1990) examined the recent developments in DEA: The
mathematical programming approach to frontier analysis. They concluded that the
rapid growth and widespread acceptance of the methodology of DEA was testimony
to its strength and applicability. According to them, the other advantages are: DEA
analyzes each DMU separately; it measures relative efficiency with respect to the
entire set being evaluated. A variable that is neither an economic resource nor a
102

product but is an attribute of the environment or of the production process can be


easily included in a DEA-based production model. Finally, they concluded that DEA
uses standard techniques of linear programming which benefits computation; dual
variables, clear interpretations etc.

Battese (1992) made an attempt to review the applications of Frontier production


functions and measure of technical efficiency in the empirical applications of
agricultural economies in the developing and developed countries. He opined that
frontier production functions have permitted sophisticated analyses of technical
efficiency in wide range of studies. But, some times, these studies opened to
criticism for not including some relevant inputs or firm-specific variables or for not
involving more appropriate functional forms. He also suggested that the use of
frontier production functions for the prediction of the technical efficiencies of farmers
involves several problems which require further research. The precision of predictors
for individual technical efficiencies was also an area which required careful research.

Heshmati and Kumbhakar (1994) examined the technical efficiency of four panels of
Swedish dairy farms, during the period 1976-1988, excluding 1985, using the
stochastic frontier approach and a translog production function. They found that the
mean technical efficiency indices were located between 0.81 and 0.83 for all four
panels. Jonasson (1996) measured various output efficiencies of a sample of
Swedish farms during 1989-1991, using DEA. He found that the average technical
and allocative output efficiencies were 0.95 and 0.92 respectively. A possible reason
for the great difference between the two studies in Sweden is that Jonasson did not
aggregate output in DEA. Adding an extra output or input in DEA will never cause a
reduction of the efficiency scores and a greater number of outputs and inputs
compared to the total number of observations will always cause greater efficiency
scores (Coelli et al, 2002). Thus, the difference is much likely to depend on the
difference in the methods.

Coelli (1995) summarized different studies on recent developments in frontier


modeling and efficiency measurement. He surveyed the potential applicability of
these methods in agricultural economics and compared the two primary methods
(i.e., SFA and DEA). He concluded in his study that the best method one should use
103

is depends upon its application. If one is using farm level data where measurement
error, missing variables, weather etc are likely play a significant role, he
recommended SFA for use in most agricultural applications. Further more, in
instances where production involves more than one product, and construction of an
aggregate measure of output is difficult, DEA may be more attractive (poultry, dairy,
pig farming etc). All forms of empirical modeling, a frontier study was suffered from a
variety of possible pitfalls, such as: poorly measured inputs data, the unaccounted
environmental factors, improper soil quality or topography measurement influenced
technical efficiency measurement.

Johansson H (2005) conducted a study to assess technical, allocative and economic


efficiency on Swedish Dairy farms. He used both Data Envelopment Analysis (DEA)
and Stochastic Frontier Approach (SFA) for this purpose and results were compared.
When applying SFA, the mean technical, allocative and economic efficiency indices
for the entire period were 0.55, 0.75 and 0.41 respectively. However, when applying
the DEA, they were 0.74, 0.61 and 0.45 respectively. Thus, the mean technical
efficiency index is much higher under DEA than under SFA. Following the example
of Sharma (1999) a paried t-test was conducted which shows that the measures of
technical efficiency were significantly higher under the DEA approach. This is
somewhat unexpected since DEA is deterministic and reports all deviations from the
frontier as inefficiency. Thus, the measures are expected to be higher under SFA. As
all three indices are measured against the same frontier, the measure of economic
efficiency is consequently higher under the DEA approach. This was also confirmed
by the paired t-test. However, the t-test showed that the measures of allocative
efficiency were significantly higher under SFA. This is most likely a consequence of
the low technical efficiency indices. A Kruskal-Wallis test was conducted to test for
differences in efficiency rankings between SFA and DEA, which showed no evidence
for different rankings. He concluded that when the entire dairy farm is studied, the
DEA is more appropriate to use since it does not require any particular parametric
form to be chosen. He also concluded that the Cobb-Douglas production function is
not a satisfactory choice of frontier function when the farm is studied from the
integrated perspective. However, to derive the allocative and economic efficiency of
the farms, it was necessary to assume a self dual production function (i.e. Cobb-

104

Douglas). He also found that the influence of size on the efficiency scores of a firm
indicated a positive relationship between them.

Obviously, choosing between parametric and nonparametric methods is a delicate


matter and some studies comparing the results of two approaches have been done.
An example outside the agricultural sector is Coelli and Perelman (1999) who
compared technical efficiency scores on a sample of European railways. They found
that the choice of method should not have much influence on the results. Resti
(1997) compared cost efficiency scores on a sample of Italian banks. She found that
there was not much difference between the two methods. In agriculture, an example
is Irizoz et al (2003) who compared technical efficiency results on a sample of
Spanish vegetable producers and found correlation between the parametric and
nonparametric approach. Sharma et al (1999) who compared the decomposition of
economic efficiency into its technical and allocative parts under parametric and
nonparametric approaches on swine producers in Hawaii. In their study the SFA
technical efficiency was measured against a Cobb-Douglas production function.
They found that, on average, the estimated technical and economic efficiencies were
significantly higher in the SFA compared to the DEA under the assumption of
constant returns to scale (CRS). Under the assumption of variable returns to scale
(VRS) however, the measures were quite similar. Allocative efficiency was found to
be generally higher in DEA. The efficiency ranking of the farmers in the sample was
positively correlated, indicating that the two approaches assess relative efficiency to
the same farms. An analogy to the studies outside the agricultural sector is not
possible for the same reason, but also because agriculture is likely to differ much
from other sectors in the economy. One reason is the strong connection to and
dependence on the farm family.

Many studies have showed that the results of efficiency are sensitive to the method
selected for estimate the efficiency scores. The choice of method to use is in no way
obvious, but has to be decided in every case. The quality of the data, the
appropriateness of various functional forms, and the possibility of making
behavioural assumptions will heavily influence the relative appropriateness of DEA
and SFA. For example, the DEA approach, compared to the SFA doesnt require any
specific functional form to be selected, neither are any behavioural assumptions
105

needed as long as allocative efficiency is not considered. However, DEA is a


deterministic approach, meaning that it doesnt account for noise in the data. All
deviations from the frontier will thus be accounted for as inefficiencies. Therefore the
DEA efficiency scores are likely to be sensitive to measurements errors and random
errors. The SFA on the other hand accounts for random errors and has the
advantage of making inference possible. (Coelli et al, 2002). However, SFA is
sensitive to the choice of functional form.

In summary, the main conclusion is that none of the proposed methods of measuring
efficiency relative to an estimated frontier is perfect. However, they all provide
substantially better measures of efficiency than simple partial measures (Coelli,
1995). Further, detailed comprehensive reviews of the two approaches were
provided by Lovell (1993), Ali and Seiford (1993), Coelli (1995), Bauer (1990), Fried
et al. (1993), Bravo-Ureta and Pinheiro (1993). In general, a large number of studies
on efficiency measurements argue that a researcher can safely choose any of the
methods since there are no significant differences between the estimated results
(Coelli, Sandura and Colin, 2002). Hence, this study followed DEA technique for
analyzing the efficiency of organic input units in India. The dual output (vermicompost and worms) nature of organic input units is also one of the reasons for the
selection of DEA technique compared to SFA.

4.3 Specification of model (Data Envelopment Analysis)


DEA involves the use of linear programming methods to construct a non-parametric
piecewise surface (or frontier) over the data, so as to be able to calculate efficiencies
relative to this surface. More detailed reviews of the DEA methodology were also
presented by Seiford and Thrall (1990), Lovell (1993), Ali and Seiford (1993), Lovell
(1994), Charnes et al (1995) and Seiford (1996).

Charnes,

Cooper

and

Rhodes

(CCR)

(1978)

introduced

mathematical

programming approach, Data Envelopment Analysis (DEA), to calculate the relative


efficiencies of decision-making units (DMUs) based on constant returns to scale
(CRS)

assumption.

CCR

used

the

optimization

method

of

mathematical

programming to generalize the Farrell (1957) single-output/input technical efficiency

106

measure to the multiple-output/input case by constructing a single virtual output to


single virtual input relative efficiency measure. Subsequently, numerous papers
have considered alternative sets of assumptions, such as Banker, Charnes and
Cooper (BCC) (1984) who proposed a variable returns to scale (VRS) model. It
distinguishes between technical and scale inefficiencies (see Fare et al., 1994 also).
Later Fare, Grosskopf, Norris and Zhang (1994) applied Malmquist DEA methods to
panel data to calculate indices of total factor productivity (TFP) change, technological
change; technical efficiency change and scale efficiency change. DEA is a system
approach widely used in management science and economics, in which the
relationships between all inputs and outputs are taken into account simultaneously
(Yusuf and Malomo, 2007). The method enables to find out the relative efficiency of
a farm and to examine its position in relation to the optimal situation. The strength of
DEA is that it does not require any assumptions about the functional farm.

Assume there is a data on K inputs and M outputs on each of N firms or DMUs. For
the ith DMU these are represented by the vectors xi and yi, respectively. The K x N
input matrix, X, and the M x N output matrix, Y, represent the data of all N DMUs.
The purpose of the DEA is to construct a non-parametric envelopment frontier over
the data points such that all observed points lie on or below the production frontier.
Given the CRS assumption, this can be represented as:

The best way to introduce DEA is via the ratio form. For each DMU we would like to
obtain a measure of the ratio of all outputs over all inputs, such as uyi / vxi, where u
is an M x 1 vector of output weights and v is a K x 1 vector of input weights. To
select optimal weights we specify the mathematical programming problem:

Max u, v (uyi / vxi)


st
uyj / vxj 1,
u, v 0

j = 1, 2 . . . N,
(1)

This involves finding values for u and v, such that the efficiency measure of the ith
DMU is maximized, subject to the constraint that all efficiency measures must be
less than or equal to one. One problem with this particular ratio formulation is that it

107

has an infinite number of solutions. To avoid this one can impose the constraint vxi =
1, which provides:
Max u, v ( yi),
st
xi = 1,

y j - x j 0, j = 1, 2 . . . N,
, 0

(2)

Where the notation change from u and v to

and reflects the transformation, this

form is known as the multiplier form of the linear programming problem.

Using the duality in linear programming, one can derive an equivalent envelopment
form of this problem:
Min , ,
yi + Y

Subject to
xi X

0,

0,
(3)

Where is a scalar and is N x 1 vector of constants. This envelopment form


involves fewer constraints than the multiplier form (K+M < N+1), and hence is
generally the preferred form to solve. The value of obtained will be the efficiency
score for the ith DMU. It will satisfy 1, with a value of 1 indicating a point on the
frontier and hence a technically efficient DMU, according to the Farrell (1957)
definition. Note that the linear programming problem must be solved N times, once
for each DMU in the sample. A value of is then obtained from each DMU.
The CRS assumption is only appropriate when all DMUs are operating at an optimal
scale. Imperfect competition, constraints on finance, etc, may cause a DMU to be not
operating at optimal scale. The use of the CRS specification when not all DMUs are
operating at the optimal scale will result in measures of TE which are confounded by
Scale efficiencies (SE). The use of the VRS specification will permit the calculation of
TE devoid of these SE effects. The CRS linear programming can be easily modified
to account for VRS by adding the convexity constraint: N1 =1 to (3) to provide:

108

Min , ,
yi + Y

Subject to
xi X
N1 =1
0

0,

0,
(4)

Where N1 is an N x 1 vector of ones, this approach forms a convex hull of


intersecting planes which envelope the data points more tightly than the CRS conical
hull and thus provides technical efficiency scores which are greater than or equal to
those obtained using the CRS model.

Many studies have decomposed the TE scores obtained from a CRS DEA into two
components, one due to scale inefficiency and one due to pure technical efficiency.
If there is a difference in the two TE scores for a particular DMU, then this indicates
that the DMU has scale inefficiency, and that the scale inefficiency can be calculated
from the differences between the VRS TE score and the CRS TE score.

CRS TE = VRS TE x SE

(5)

If one has price information and is willing to consider a behavioural objective, such
as cost minimization and revenue maximization, then one can measure both
technical and allocative efficiencies. The cost minimization vector of input quantities
given the input prices is determined using:
Min ,xi* wi xi*,
Subject to -yi + Y
xi* X

0,

0,

N1 = 1

0,

(6)

Where wi is a vector of input prices for the i-th DMU and xi* (which is calculated by
the LP) is the cost-minimizing vector of input quantities for the i-th DMU, given the
input prices wi and the output levels yi. The total cost efficiency (CE) or economic
efficiency of the ith DMU would be calculated as
CE = wi xi* / wi xi

109

That is, the ratio of minimum cost to observed cost. One can then calculate the
allocative efficiency residually as AE = CE / TE

In many studies the analysts have tended to select input-oriented models because
many DMUs have particular orders to fill (ex. production units) and hence the input
quantities appear to be the primary decision variables, this argument may not be as
strong in all industries. In some industries the DMUs may be given a fixed quantity of
resources and asked to produce as much output as possible. In this case an output
orientation would be more appropriate. Essentially one should select an orientation
according to which quantities (inputs or outputs) the managers have most control
over. Further, Coelli and Perelman (1996) concluded in their study that the choice of
orientation will have only minor influences upon the score obtained. Hence, this
study adopted only input orientation rather than output orientation because the
sample related to organic production units where output determines by inputs.

Each observation included two outputs i.e., average vermi-compost production (Y1)
per unit per annum in tons and sale of worms (Y2) per unit per annum in kg. In the
input category, four variables were included. They were raw materials qty (X1)
mainly dung in tons per annum, qty of worms used per annum (X2) in kg, units of
labor used (both hired and own) per annum (X3) and no.of months electricity (X4)
used per annum. The unit prices of four input variables were also used in the
calculation of cost-DEA functions. Under this approach, both CRS and VRS models
were applied to data with input orientation. The DEA models were estimated using
programme DEAP 2.0 (Coelli, 1996).

4.4 Sampling strategy

Keeping the issues covered in the earlier sections, the study considered both organic
input production units (sanctioned under NPOF scheme only) as well as organic
input user i.e. organic farmers for the sample. The present study used the following
steps for identification of the sample:

Step 1: The selection of sample organic input units for the study was purposively
chosen from four states, namely; Punjab, Uttar Pradesh, Gujarat and Maharashtra.
110

One of the reasons for choosing these four states was to see the comparison in
efficiency of organic input units between the Northern states (where irrigation and
fertilization application is default in states like Punjab and U.P) and Western states
(where irrigation and fertilizer application is optional in states like Maharashra and
Gujarat) of India. Moreover, study has also a limitation in choosing the sample only
from vermi-hatchery units rather than from other two types of input units (biofertilizers and fruit and vegetable waste units). This is because of the highly
scattered distribution of three type units across different states of India. However,
these four states accounted for nearly 60 per cent of total sanctioned vermi-hatchery
units in India (see table 3.3). The details of sample selected for the study is
presented in table 4.1.

The two sanctioned fruit and vegetable waste units present in Uttar Pradesh and
Gujarat states were covered in the study. There are no fruit and vegetable waste
units sanctioned in Punjab and Maharashtra states. Similarly, in case of bio-fertilizer
units, one unit from each state was selected randomly from the population. But, there
is no bio-fertilizer unit sanctioned in Uttar Pradesh state. So, the total bio-fertilizer
units included in the sample was three out of the total population of ten units in four
states. Fourth bio-fertilizer unit was selected for the study from the two Maharashtra
units subsidized by NCDC (see table 3.4). But, in case of vermi-culture hatchery
units, a total sample of 40 units were chosen in clusters under four states for the
study. The criterion used for selection of sample units from each state was on their
respective weights in the population. Due to their extremely scattered nature in each
state, vermi-hatchery sample units were chosen in two to three groups/clusters in
order to minimize the travel costs and time. A well structured and pre-tested
questionnaire was administered to extract some common quantitative parameters of
each type of unit; with utmost emphasis was placed on qualitative case analysis
through interaction with the organic input units.

Apart from the quantitative analysis of primary data for efficiency measurement,
qualitative analysis of efficiency was done by in-depth case analysis of selected
units. Two fruit and vegetable waste units and four bio-fertilizer units (3 from
NABARD and one from NCDC sample) were covered comprehensively as cases.
Similarly, two vermi-hatchery units were also highlighted as cases to complement the
111

quantitative results obtained. Finally, a sum of eight cases was described separately
in this chapter 5.

Table 4.1 Details of sample units selected for the study


Type of input
unit
Fruit and
vegetable
waste units
Bio-fertilizer
units
Vermiculture
hatchery units

Punjab
-

1
(1)
6
(42)

Uttar
Pradesh
1
(1)

Gujarat

Maharashtra

1
(1)

1
(3)
13
(86)

1
(6)
4
(29)

17
(115)

Total sample for


study
2
(2)
3 + 1 NCDC unit
(12)
40
(272)

Note: Figures in the parentheses indicates total no.of units sanctioned in that state

Step 2: A random sample of 15 organic farmers per each state (organic input users)
were drawn from study area to canvass a structured questionnaire to extract
constraints in procuring and usage of organic inputs etc. Thus, the study covered 60
organic farmers from four states. Another random sample of 15 conventional farmers
(in-organic input users) was also selected to compare the crop economics and
productivity of crops with organic cultivation in the respective study area.

4.5 Empirical results


The empirical results highlighted in this section were mainly pertains to vermihatchery units sanctioned under NPOF scheme. The details of fruit and vegetable
waste units and bio-fertilizer units were represented as detailed cases in chapter 5.
All the sample vermi-hatchery units were contacted with advance intimation to
promoters and visited them along with respective officials from financial bank. The
results of primary data collected were organized in following sections:
4.5.1 Sample distribution
The details of sample districts, blocks/talukas and villages chosen for the study are
presented in table 4.2. A total of 40 sample units were selected from Gujarat,
Maharashtra, Punjab and Uttar Pradesh states purposively based on their weights in
the total units sanctioned in these four states. A sample of 13 units from Gujarat and
4 units from Maharashtra were chosen randomly which accounted for 15.1 and 13.8

112

per cent to the total number of units sanctioned in their states respectively. Similarly,
six units from Punjab and 17 units from Uttar Pradesh were identified for the study.
They accounted for 14.3 and 14.8 per cent of the total units sanctioned in these
states. In Gujarat, three sample districts namely Baroda, Ghandhinagar and
Sabarkanta were selected because location of units in clusters. Among these
districts, a large cluster of 8 units was present in Baroda district followed by
Ghandhinagar (4) and Sabarkanta (1). The selected 13 sample units were in turn
again located in 4 talukas/blocks and eight villages of the state. Savli taluka was
having the largest cluster of eight sample units. Similarly, among all villages,
Subhaelav was having maximum number of five sample units.
Table 4.2 Distribution of the sample
Strata
Sample*
Sample
Districts^

Sample
Talukas/
Blocks^

Sample
Villages^

Gujarat
13
(15.1)
Baroda (8)
Ghandhinagar (4)
Sabarkanta (1)
Savli (8)
Dehgam (3)
Prantij (1)
Ghandhinagar (1)

Maharashtra
4
(13.8)
Ahmednagar (3)
Sangli (1)

Punjab
6
(14.3)
Ludhiana (4)
Fatehgarh Sahib(2)

Sangamner (1)
Khanapur (1)
Newasa (2)

Machhiwara (4)
Basipathana (2)

Subhaelav (5)
Gothada (2)
Savli (1)
Vasanachaudary (1)
Patnakuva (1)
Ghdakan (1)
Palaiya (1)
Chandrala (1)

Dadhkurd (1)
Renavi (1)
Rastapur (2)

Rajgarh (2)
Sherpur (2)
Sirkapra (2)

Uttar Pradesh
17
(14.8)
Baghpath (11)
Muzaffarnagar (4)
Aligarh (2)
Chamrawal (1)
Faizullapur (1)
Hisarda (1)
Kekhada (2)
Singhavali (1)
Sadikapur (2)
Baghpat (3)
Titawi (1)
Baghra (3)
Gaumat (2)
Chamrawal (1)
Faizullapur (1)
Hisarda (1)
Badagon (1)
Khatta prahladpur (1)
Singhavali (1)
Sadikapur (1)
Surajpur Makhanwa (1)
Mitili (1)
Sisana (1)
Dola (1)
Lakhan (1)
Naseerpur (1)
Ladwa (1)
Naseerpur (1)
Rajpur (1)
Sujanpur (1)

Note: * - Figures in the parenthesis indicate percentage to total units sanctioned in that state
^ - Figures in the parenthesis indicate no. of units chosen

113

In case of Maharashtra, two districts were chosen for the study. They are namely
Ahmednagar and Sangli districts. A sample of three out of four selected units were
situated at Ahmednagar where as Sangli was having one unit. Overall, the sample
units were identified in three talukas/blocks and three villages of the state. Taluka
Newasa and Rastapur village both were having two units each in them.
Sample of six units in Punjab was dispersed in two districts namely Ludhiana and
Fatehgarh Sahib. Ludhiana was having more number (4) of units in Machhiwara
block when compared with Fatehgarh Sahib where two units were present in
Basipathana block. The six units were equally distributed among three villages i.e.,
Rajgarh, Sherpur and Sirkapra of the state.
Baghpath, Muzaffarnagar and Aligarh were the three districts selected under Uttar
Pradesh state for the study. A lion share of 65 per cent units was located in
Baghpath followed by Muzaffarnagar (23.5%) and Aligarh (11.5%) district. The
sample units in the state were much scattered in around 10 talukas/blocks. However,
all the selected 17 sample units were also identified from 17 villages of the state.
4.5.2 Socio-economic characteristics of sample
The socio-economic profile of sample beneficiaries is presented in table 4.3. Overall,
only three beneficiaries (7.5 per cent) out of 40 were having vermi-hatchery as their
primary occupation. All the three beneficiaries belonged to Uttar Pradesh state. A
major share (62.5 per cent) of beneficiaries expressed agriculture as major source of
income. The remaining 30 per cent of sample beneficiaries were depended on
livestock, business, service etc as the principle income avenues. The percentage
dependency on agriculture as main source of income was very high in Gujarat
followed by Punjab, U.P and Maharashtra. We can conclude that majority of the
beneficiaries were not relying on vermi-hatchery as a major income source.
Only three beneficiaries (7.5 per cent) were expressed vermi-hatchery as their
secondary source of income. Nearly, half of the sample (47.5 per cent) was
dependent on agriculture and animal husbandry sectors. A sample of 27.5 per cent
beneficiaries was earning their secondary incomes through service and business.
Seven (17.5 per cent) out of 40 sample beneficiaries were not rely on any economic
activity for their secondary occupation. Among different states, the share of
114

dependency on service/business was high in Gujarat followed by Punjab. The results


indicate that most of the farmers in the study area are not taking up vermi-hatchery
units in a commercial way.
.
On the whole, more than half (55 per cent) of the sample was studied either
intermediate or graduation. One-fourth of the beneficiaries were passed out in postgraduation or in doctorate. Only 17.5 per cent of the borrowers were just qualified in
tenth class. A lone farmer (2.5 per cent) in the entire sample did not have education.
The illiteracy was high (7.6 per cent) in Gujarat when compared to other states. In
general, 35 per cent of the sample beneficiaries were members either in formal
(village gram panchayat or credit cooperative society or milk cooperative society or
cane growers association) or informal bodies (environmental society or educational
society). None of the sample borrower from Gujarat state was member in any
society. But, their membership was significant in the remaining three states.

Table 4.3 Socio-economic characteristics of the sample (no. of units)


Parameter
Primary occupation
a. Vermi hatchery
b. Agriculture
c. Others
Secondary occupation
a. Vermi hatchery
b. Agriculture/ livestock
c. Service/Business
d. None
Educational qualifications
a. Illiterate
b. S.S.C
c. Intermediate/Graduate
d. Post-graduate/Doctorate
Other positions (Y/N)
a. Yes
b. No
Average family size (no.)
Average no.of family labor
work in the unit (no).
Average land holding
(acres)
Livestock (no.)

Gujarat

Maharashtra

Punjab

Uttar
Pradesh

Over all
(n=40)

0
10
3

0
2
2

0
4
2

3
9
5

3
25
12

0
6
5
2

1
2
0
1

0
2
2
2

2
9
4
2

3
19
11
7

1
2
9
1

0
0
2
2

0
2
2
2

0
3
9
5

1
7
22
10

0
13
5.7
0.8

2
2
4.7
1.7

2
4
5.3
1.6

10
7
7.6
2.0

14
26
6.3
1.5

19.1

102.0

49.5

9.4

27.8

6.9

102.5

13.3

4.3

16.3

115

On an average, the size of family was 6.3 per household. The average size of the
family was the highest in U.P (7.6) followed by Gujarat, Punjab and Maharashtra.
The lowest size of family (4.7) was recorded in Maharashtra state. Overall, the
average number of family members participated in vermi-hatchery unit was 1.5 per
household. But, their participation rate was the highest in U.P (2.0) followed by
Maharashtra, Punjab and Gujarat. The lowest family participation rate was noticed in
case of Gujarat (0.8 per household). This also confirms that they were more
interested in non-farm activities rather than farm-activities.

The average size of land holding per household was 27.8 acres. This value was
much higher in Maharashtra (102 acres) because two landlords who have 200 acres
each were established vermi-hatchery units. Among the three remaining states,
Punjab was having the highest (49.5 acres) followed by Gujarat and U.P. The mean
size of livestock population per household was 16.3. It indicates that each household
was having sufficient number of buffaloes for production of vermi-compost. Similarly,
the value was very high for Maharashtra (102.5) because two landlords were having
200 animals each in their farms. The lowest number of animals (4.3) per household
was observed in U.P state.

4.5.3 Primary details of sample units


The state-wise primary details of the selected units is presented in table 4.4. On
whole, only 22 out of 40 units were functioning on the day of visit. The number of
non-functioning units were maximum (100 per cent) in case of Gujarat. The main
reasons for not functioning are: lack of demand for vermi-compost, neither JMC visit
nor subsidy release from NABARD, death of worms in high temps, heavy rains and
floods. The percentage of non-functioning units was 25 and 23.5 per cent
respectively in case of Maharahstra and U.P states. But, in case of Punjab all six
units were functioning well.
Almost all the 40 sample units were completed the establishment of units. None of
the sample unit is still under construction process. Nearly 97.5 per cent units have
finished their construction with in stipulated period of six months. A lone unit in U.P
has crossed its timeline of six months for establishment of unit. The average time
taken from sanctioning of the loan to completion of unit was 96 days. The state-wise
116

average time taken was the highest in case of Maharashtra followed by U.P, Punjab
and Gujarat. It indicates that most of structures constructed in Gujarat were taken
very less time.
Table 4.4 Primary details of sample units (no. of units)
Item
Units functioning on day of visit
a. Functioning
b. Not functioning
Units construction
a. Completed
b. Not completed
Construction completed with in
a. Stipulated six months time
b. Not completed
Average time taken from sanctioning
to completion of unit (days)
Any refund of advance subsidy
a. Yes
b. Avg. amount (lakh)
Completion certificate given to bank
a. Yes
b. No
Joint Monitoring committee (JMC)
visited
a. Completed
b. Not completed
Final subsidy received (Rs.)
a. Yes
b. Avg. amount (lakh)
Average age of the unit (months)
a. Less than or equals to 12
b. Between 13-24
c. > 24
Encountered problems in getting
subsidy from NABARD
a. Yes
b. No
Any permission/license obtained
for marketing
a. Yes
b. No

Gujarat Maharashtra Punjab Uttar


Pradesh

Over all

0
13

3
1

6
0

13
4

22
18

13
0

4
0

6
0

17
0

40
0

13
0

4
0

6
0

16
1

39
1

51

165

54

126

96

8
0.50

0
N.A

0
N.A

0
N.A

8
0.50

12
1

3
1

6
0

17
0

38
2

8
5

3
1

6
0

11
6

28
12

1
0.81

3
0.75

4
0.75

11
0.75

19
0.75

4
2
7

1
0
3

0
6
0

2
7
8

7
15
18

11
2

0
4

2
4

7
10

20
20

0
13

1
3

0
6

0
17

1
39

If the farmer could not able to construction the unit with in stipulated period of six
months time or if Joint Monitoring Committee (JMC) visits and feel that the standards

117

are not up the mark of NABARD, then NABARD will recall the advance subsidy
amount from the borrower/beneficiary. Overall, 8 units out of 40 sample units repaid
their advance subsidy to NABARD because their standards of establishment of units
was not up to the mark of NABARD stipulated guidelines. All these repaid units were
located in Gujarat state only. The average amount they paid back to NABARD was
Rs.50,000 per unit. This concludes that the units constructed in Gujarat were very
poor and inefficient when compared to other state units.

When the project is nearing in completion, the promoter will inform the bank by the
way of submission of a completion certificate. This will initiate the action for JMC
visit. Almost 95.0 per cent of sample promoters have submitted their completion
certificates to banks. One each from Gujarat and Maharashtra were not submitted to
bank till date. This was due to lack of awareness among promoters as well as bank
officials. But, so far NABARD conducted JMC visits only in 70 per cent sample units.
Nearly, 30 per cent of sample units were still waiting for JMC visits and final subsidy
amounts. This indicates a huge delay in the process of subsidy release. Among the
four states, the delays were more pronounced in Gujarat (38%) and U.P (35 %)
states. Out of the 28 units (70%) who completed JMC visits, only 19 units (67.8%)
have received the final subsidy amounts. The average amount they received was
Rs.75,000 per unit. Around 32 per cent of units were still waiting for release of final
subsidy amounts by NABARD. This was another bottleneck in the scheme where lot
of time was consuming for processing.

On whole, 45 per cent of sample units were established more than two years back.
37.5 per cent of units were belonging to the age range of between 13 and 24
months. Seven units (17.5 per cent) were having less than one year old age. In total,
nearly 82.5 per cent of the sample units were established more than one year back.
Across different states, units with age more than two years were present more in U.P
followed by Gujarat and Maharashtra.
When we asked about their problems in getting the subsidy from NABARD, nearly
half of the sample promoters were expressed that they faced problems. The
proportion of the promoters faced problems were more in Gujarat (55%) followed by
U.P (35%) and Punjab (10%). A lone farmer in the entire sample was succeeded in

118

obtaining the license/certification for marketing his product. Remaining 39 promoters


(97.5%) did not have any license or permission for marketing their product. This is
another loophole in the scheme that who will certify; how to obtain, what is the cost
etc details; many of the promoters were not aware.
4.5.4 Financial details of sample units

The summary of financial information of sample units is presented in table 4.5. On an


average, 5.9 lakh per unit was the financial outlay. The outlay was the highest in
case of Maharashtra (6.3 lakh). While, this amount was same in case of Gujarat and
U.P states (5.9 lakh). But, it was the lowest in case of Punjab state (5.7 lakh). The
average promoters contribution in the total outlay was 1.6 lakh. However, this
amount was the highest in Maharasthra followed by Gujarat. The mean bankers
loan amount was 4.3 lakh per unit. The bankers loan amount was the highest in U.P
followed by Punjab states. Nevertheless, the eligible subsidy amount was uniform
across states i.e., 1.5 lakh per unit. But, the actual mean subsidy received till date
per unit was Rs.0.93 lakh only. There was a huge gap of 0.57 lakh between these
two figures. This gap was the highest in case of Gujarat (1.23 lakh) followed by U.P
(0.27 lakh) and Punjab (0.25 lakh). The difference was the lowest in Maharashtra
(0.19 lakh). The main reasons for this difference were: not obeying the NABARD
standards and requirements and a lot of delay in final subsidy release after JMC
team visited the units.
Overall, an average, the actual amount spent by promoters for establishment of each
single unit was Rs. 5.4 lakh. Among the four states, the amount spent on each unit
was the highest in Punjab (8.2 lakh) followed by Maharashtra (7.6 lakh) and U.P (5.4
lakh). The amount was the lowest in case of Gujarat (3.5 lakh) which indicates the
poor establishment of units. The average time taken from proposal submission to
approval from financial bank was 1.65 months (roughly 50 days). The time
requirement was the lowest in case of Punjab (one month) and the highest in case of
Maharashtra (1.75 month). But, the time period was more or less similar in case of
Gujarat and U.P states.

119

Table 4.5 Financial details of sample units (Rs. lakh per unit)
Item

Gujarat

Maharashtra

Punjab

Uttar
Pradesh

Over all

Total financial outlay (a + b)

5.9

6.3

5.7

5.9

5.9

Promoters contribution (a)

1.8

2.2

1.5

1.5

1.6

Bankers loan (b)

4.1

4.1

4.2

4.4

4.3

Subsidy eligible

1.5

1.5

1.5

1.5

1.5

Actual subsidy received till date

0.27

1.31

1.25

1.23

0.93

Actual amount spent

3.5

7.6

8.2

5.4

5.4

Average time taken from


proposal submission to
approval from Bank (months)

1.23

1.75

1.0

2.2

1.65

13
0

1
3

2
4

15
2

31
9

10-12

12.5

10.5-12

11-13.75

1
12

0
4

2
4

3
14

6
34

Sanctioned Bank type


a. Commercial
b. Cooperative
ROI range (%)
Problem faced in getting
approval from the financial
Bank
a. Yes
b. No

Nearly 78 per cent of the sample units were financed by commercial banks. Only the
remaining 22 per cent were supported by district cooperative banks. The cooperative
banks sanctioned more number of units than the commercial banks in case of
Maharashtra and Punjab states. But, in case of Gujarat (100%) and U.P (88%)
states; they were dominated by commercial banks. The range of interest rate on
bank loans was found to be the highest in U.P followed by Maharashtra. But, these
ranges were a little bit low in case of Gujarat when compared with Punjab. Only, 15
per cent of the promoters opined that they faced problems in getting approval from
the financial banks.
4.5.5 Checklist for basic components in the units
The summary of checklist for basic components in the selected vermi-compost units
is presented in table 4.6. As per the National Centre of Organic Farming (NCOF),
capital investment subsidy scheme for promoting organic inputs manual, eight basic
components were identified and checked for their availability in the sample units
during field visits. In Gujarat, out of 13 sample units, none of the unit was having all

120

the basic components. Only one unit was having seed stock, raw material and
packaging etc in the state. It reveals the very poor infrastructure and maintenance of
units in the state.
Table 4.6 Checklist for basic components in the units (no. of units)
Item

Gujarat
(13)
7

Maharashtra
(4)
3

Punjab
(6)
6

Uttar
Pradesh (17)
15

Over all
(40)
31

10

20

14

31

Concrete bed

12

25

Water supply

17

36

Store room

15

31

Transport system

20

Packaging

13

23

0 (0.0)

2 (50.0)

2 (33.3)

3 (17.6)

7 (17.5)

Location
(0.5 -1 acre)
Seed stock and raw
material availability
Sheds (10-12 no.)

Over all*

* Figures in the parenthesis indicates percentage to total units sanctioned

Similarly, out of four units in Maharashtra, only two was having all eight basic
components prescribed for vermi-hatchery unit. But, three out of four units were
having many of the basic components. However, in case of Punjab, only 33.3 per
cent sample units were having all components. Transport system and storage were
the two major missing components in 66.6 and 33.3 per cent of sample units
respectively in Punjab. Only three sample units in U.P equipped with all components.
The major omitted components in U.P units were transport system followed by seed
stock and raw material. Overall, only seven units have fitted with all eight basic
components. Highest deficiency of components was observed in case of seed stock
and raw material (50%) and transport system (50%). These results clearly showed
the poor infrastructure facilities in Indian vermi-hatchery units.
4.5.6 Capacity utilization of sample units
The details of capacity utilization of sample units are presented in table 4.7.
Capacity utilization is a concept refers to the extent to which an enterprise actually
uses its installed productive capacity. Thus, it refers to the relationship between
actual output that 'is' produced with the installed equipment and the potential output

121

which 'could' be produced with it, if capacity was fully used. The details presented in
table and discussed were referring to the capacity utilization of organic input units in
the last one year.

Table 4.7 Capacity utilization of sample units (TPA)


Item

Gujarat

Maharashtra

Punjab

Uttar
Pradesh

Over all

Average installed capacity

150

150

150

150

150

Current capacity utilization

24.2

187

33

105

76.2

Capacity utilization rate (%)

16.1

124.6

22.0

70.0

50.8

Average no.of working days per


annum (days) @

319.6

365.0

325.0

337.0

332.0

Average working hours per day @

5.1

6.7

2.3

6.3

5.3

Average recovery rate (% ) @

48.0

52.5

33.3

39.7

42.7

Gestation period per cycle (days) @

46.5

35

60

50

48.8

Avg no. of cycles per year (range) @

5-7

10-15

3-5

6-8

7-9

Expected life span of unit (years) @

8.1

12.5

10.0

10.2

10.3

@ Summarized based on their past experiences in vermi-compost production

The average installed capacity of the sample units was 150 Tons Per Annum (TPA).
Overall, the average current capacity utilization was around 76.2 TPA. The average
capacity utilization rate was only 50.8 per cent which indicates nearly half of its full
potential. Across different states, the average capacity utilization was the highest in
Maharashtra followed by U.P, Punjab and Gujarat. The actual production in
Maharashtra units was more than its installed potential. The lowest capacity
production was observed in Gujarat at the rate of 24.2 TPA. The capacity utilization
rate was one sixth of the actual potential (16.1%). The reasons behind this are lack
of demand, poor production skills and insufficient infrastructure. Even though the
units in Punjab were equipped well, their productivity was low. This is because of
lack of demand for vermi-compost. In case of U.P, the average utilization rate was
70.0 TPA. The demand is slowly picking up due to its nearness to different export
channels in Delhi.

Data are also collected on different production indicators based on their past
experiences in vermi-production. In general, the average number of working days
per annum was 332 days. The number of working days per annum was higher in

122

Maharashtra (365 days) and lower in case of Gujarat state. The number of working
days per year was on par in case of Punjab and U.P even though their capacity
utilization rates were different. This may be explained with the differences in number
of working hours per day. On an average, the number of working hours per day was
5.3 hours. This value was very high in case of Maharashtra (6.7 hours) while it was
low in case of Punjab (2.3 hours).

On the whole, the average recovery rate per unit was 42.7 per cent. Across different
states, the highest recovery rate was noticed in case of Maharashtra (52.5%)
followed by Gujarat, U.P and Punjab. The high recovery rate in Maharashtra may be
one of the reasons for its high productivity. Even though, the recovery rate was high
in Gujarat, the productivity was low because of lack of production skills and influence
of climatic parameters (high temperatures, heavy rains etc). The average gestation
period per cycle for the entire sample was 48.8 days. It is dependent on various
parameters like no.of worms per cubic meter, age of the worms, raw material type
and production season. This period was the lowest in Maharashtra due their higher
efficiency levels. It was the highest in Punjab followed by U.P and Gujarat.

Overall, the average number of cycles per annum produced by the organic inputs
was 7 to 9 cycles. This number was very low in case of Punjab because of its
highest gestation period. The number of cycles was the highest in Maharashtra due
to its low gestation period and more number of working days per year. There was
wide range of factors which could influence the number of cycles per annum per unit.
In general, the mean life expectancy of the organic input units was 10.3 years.
Among four states, the expected life of organic inputs was lower in Gujarat because
of their poor infrastructure. The sample promoters were expressed the highest
expectancy in case of Maharashtra.
4.5.7 Economics of vermi-compost production
The detailed break-up of average cost of production, yield and gross returns of
sample vermi-compost units in Gujarat and Maharashtra states is presented in table
4.8. The cost of production of vermi-compost per quintal in Gujarat was Rs.453. But,
the same was Rs.218 per quintal in case of Maharashtra state. The difference
between them was due to the low productivity and poor capacity utilization. The
123

productivity per annum was almost 8 times higher in Maharashtra when compared to
Gujarat units. The net returns per unit per annum was higher and positive
(Rs.428911) in Maharashtra while it was negative (Rs. -53076) in Gujarat. Among
different cost components, the lion share was noticed in raw materials cost. It
accounted for almost 55 per cent in the total cost of production in case of
Maharashtra where as in case of Gujarat the share was 51 per cent. The next
biggest component was labor cost (around 20 %) in Maharashtra. But, in case of
Gujarat, seed stock cost occupied 26 per cent in the total cost of production. The
reason for higher seed stock cost in Gujarat was repeated death of worms due to
higher temperatures, heavy rains and unknown diseases.
Table 4.8 Break-up of average cost of production of vermi-compost in Western
states (Rs per annum per unit)
Item
Gujarat
Maharashtra
Average
Raw material costs

56000

224500

140250

Cost of worms

28800

10476

19638

Labor costs

10269

80000

45135

Water costs

1000

2000

1500

Packaging costs

950

12332

6641

Marketing costs

13000

6500

Transportation costs

Rents, taxes, insurance if any

815

21500

11158

11740

43656

27698

Total costs

109574

407464

258520

Compost production (quintals)

242

1870

1056

55418
1080

794750
41625

425084
21353

Total returns

56498

836375

446437

Net returns

-53076

428911

187917

453

218

245

Repairs and maintenance


Interest on working capital#

Returns from
a. Compost sale
b. Worms sale

COP of vermi-compost
(per quintal)
# @ 12 per cent per annum

124

To acquire the average cost of production of vermi-compost in Western region, the


mean was calculated based on Gujarat and Maharashtra costs and returns. On the
whole, the average cost of production per quintal was Rs.245. The mean net returns
per unit were Rs.187917 per annum. The mean productivity per unit per annum was
1056 quintal. These results revealed that only 70 per cent of their existing capacity
was utilized.
The economics of costs of production of vermi-compost in Punjab and Uttar Pradesh
states are summarized and presented in table 4.9. The costs of production per
quintal of vermi-compost in Punjab and U.P were Rs. 433 and Rs.324 respectively.
Nearly, 34 per cent higher cost of production per quintal was observed in case of
Punjab. This was due to the low productivity and higher labor costs per unit of labor.
The productivity in U.P units was more than 3 times higher when compared to
Punjab units. The net returns per unit per annum were Rs.18253 and Rs.371366
respectively in Punjab and U.P. The net returns per unit were much higher in U.P
farms (20 times) for the same in Punjab. Amongst the different costs, cost of raw
material, seed stock and labor costs were the major items in U.P units. The cost of
raw material was around 10 per cent of the total costs in case of Punjab. It indicates
the raw material costs were much cheaper in Punjab when compared to other states.
Cost of seed stock and labor costs were occupied major shares in Punjab units.

To elicit the average cost of production of vermi-compost from Northern region, a


mean was calculated by using the costs and returns data from Punjab and U.P units.
Overall, the average cost of production per quintal in Northern region was Rs.350.
The net return per unit per annum was Rs.194809. The average productivity per
annum was 690 quintal (46%) which indicates less than 50 per cent of the existing
capacity.

The summary of comparison of costs and returns between Western and Northern
regions is presented in table 4.10. The cost of production per quintal was 42.8 per
cent higher in Northern region when compared to Western region. But the price
realization per quintal including the by product (worms) was higher (49.4 per cent) in
Northern region. It indicates that the demand for vermi-compost was high in Northern
states. The net margin per quintal was also very high (58.4 per cent) for Northern

125

region. From this table, we can conclude that the production of vermi-compost was
much profitable in Northern region when compared to Western region.
Table 4.9 Break-up of average cost of production of vermi-compost production
in Northern states (Rs per annum per unit)
Item
Punjab
Uttar Pradesh
Average
Raw material costs

14796

96600

55698

Cost of worms

58450

96750

77600

Labor costs

50000

78660

64330

Water costs

1070

11995

6533

Packaging costs

2640

12600

7620

Marketing costs

345

173

Transportation costs

Rents, taxes, insurance if any

666

6656

3661

15315

36433

25874

Total costs

142937

340039

241489

Compost production (quintals)

330

1050

690

159390

238350

198870

1800

473055

237428

Total returns

161190

711405

436298

Net returns

18253

371366

194809

433

324

350

Repairs and maintenance


Interest on working capital#

Returns from
a. Compost sale
b. Worms sale

COP of vermi-compost
(per quintal)
# @ 12 per cent per annum

Table 4.10 Comparison of costs and returns between Western and Northern
regions (Rs)
Item
Western
Northern
% change
region
region
Cost of production per quintal
245
350
42.8
Price realization per quintal *

423

632

49.4

Net margin per quintal

178

282

58.4

* Including the sale of worms

126

The summary of economics of vermi-compost production across different states is


presented in table 4.11. The results clearly proved that the production of vermicompost was a profitable venture in India. The weighted average cost production per
quintal was Rs.286 and price realization for the same was Rs.506. The weighted net
margin per quintal of vermi-compost production was Rs.220. This is a quite
significant margin in agri-business sector. Among different states, the cost of
production was the highest in Gujarat followed by Punjab, U.P and Maharashtra.
Good production skills, higher market demand and economies of scale of production
are may be the reasons for higher productivity and low cost of production in
Maharashtra. Per quintal price realization was the highest in U.P followed by Punjab,
Maharashtra and Gujarat. Proximity to Delhi Metropolitan and vermi-compost export
channels helped U.P state to realize more price. Even though, the productivity and
market demand was relatively low in Punjab, presence of green houses and
nurseries in Chandigrah facilitating to get reasonable price for vermi-compost. The
average net margin per quintal was the highest in U.P while it was the lowest and
negative value in Gujarat state. By administering proper training to promoters and
providing technical know-how in vermi-compost production would yield good results
in Gujarat state as well.

Table 4.11 Summary of economics of vermi-compost production in India (Rs)


Item

Gujarat Maharashtra

Punjab

U.P

Cost of production per quintal (Rs)

453

218

433

324

Weighted
average
286

Price realization per quintal (Rs)*

233

447

488

678

506

Net margin per quintal (Rs)

-220

229

55

354

220

* Including the sale of worms

4.5.8 Efficiency of organic input firms


The frequency distribution, mean, maximum, minimum and standard deviation of
technical, allocative and economic efficiencies both under CRS and VRS models of
DEA approach for sample organic input production units is presented in table 4.12.
Both input and output quantities and their unit prices per unit per annum were
collected and used for this efficiency analysis. The estimated mean technical,
allocative and economic efficiencies under DEA-CRS model were 63.7, 50.95 and

127

32.95 per cent respectively. Similarly, values for the three efficiencies under DEAVRS model were 83.39, 59.42 and 50.24 per cent respectively. In terms of technical
efficiency, about 45 per cent of the sample units have more than 90 per cent
efficiency under the VRS model. Under the CRS model, only 20 per cent of the
sample units have more than 90 per cent efficiency. In case of allocative efficiency,
majority of sample units (40 per cent) fell under less than 50 per cent category under
VRS model while 47.5 per cent of the same belonged to less than 50 per cent
category under CRS assumption. The economic efficiency of most of the organic
inputs (85 per cent) under CRS model distributed under less 50 per cent category.
Correspondingly under VRS model, the largest part of sample (57.5 per cent) were
also scattered in the same class. It is concluded from the table that majority of the
sample organic units (47.5 per cent) were come under less 50 per cent technical
efficiency under CRS assumption, indicating that the organic production units were
inefficient. To supplement the above statement, the most frequent interval of
allocative and economic efficiency was 1 to 50 per cent under both CRS and VRS
assumptions. Further, it signifies that the organic production units in India were
suffering from both technically inefficiency in using resources as well as unable to
allocate inputs in the cost minimizing way.
Table 4.12 Frequency distribution of efficiency of organic input units (n=40)
Efficiency (%)

CRS

VRS

TE

AE

EE

TE

AE

EE

1-50

47.5

47.5

85.0

12.5

40.0

57.5

51-60

5.0

17.5

2.5

2.5

7.5

10.0

61-70

5.0

10.0

0.0

5.0

20.0

10.0

71-80

12.5

7.5

5.0

10.0

2.5

2.5

81-90

10.0

10.0

2.5

25.0

20.0

10.0

91-100

20.0

7.5

5.0

45.0

10.0

10.0

Max (%)

100

100

100

100

100

100

Min (%)

25.4

12.8

8.8

44.6

16.3

13.4

Mean (%)

63.7

50.95

32.95

83.39

59.42

50.24

Standard deviation (%)

24.0

25.7

24.1

18.8

25.2

26.4

128

The average comparison of efficiencies of organic input units across states and
regions is presented in table 4.13. Among the four states, the mean technical
efficiency was the highest for Maharashtra followed by U.P, Gujarat and Punjab
under CRS model. But under VRS model, the highest technical efficiency was found
in Maharashtra followed by Gujarat, U.P and Punjab. In case of allocative efficiency
and economic efficiency, Maharashtra stood first both under CRS and VRS
assumptions. It indicates that Maharahstra units were much more efficient than any
other states. In remaining three states, the second best units were found in U.P
based on AE and EE under CRS model. However, when we compared between the
two regions, a slightly higher efficiency (TE, AE and EE) values were observed in
Northern region under CRS assumption. These results were also supporting the cost
of production calculations found in Northern region. But, this was reversed under
VRS assumption.
Table 4.13 Average efficiency of organic input units across states and regions
State (no.of units)

CRS

VRS

TE

AE

EE

TE

AE

EE

Avg. Gujarat units (13)

0.55

0.39

0.21

0.93

0.58

0.55

Avg. Maharashtra units (4)

0.84

0.79

0.66

1.00

0.82

0.82

Avg. Western region (17)

0.62

0.48

0.32

0.95

0.63

0.61

Avg. Punjab units (6)

0.52

0.40

0.17

0.58

0.42

0.21

Avg. U.P units (17)

0.69

0.57

0.39

0.80

0.61

0.49

Avg. Northern region (23)

0.65

0.53

0.34

0.74

0.56

0.42

The scale efficiencies among organic input production units are summarized by state
wise and region wise and presented in table 4.14. The scale efficiency index among
sample varied from 32.7 per cent to 100 per cent, with a mean value of 77.7 per
cent. In terms of scale efficiency, about 20 per cent sample showed constant returns
to scale where as 7.5 per cent exhibited decreasing returns to scale. Majority of the
units (72.5 per cent) demonstrated increasing returns to scale. Among four states,
the highest scale efficiency was observed in Punjab state. The same value for U.P

129

and Maharashtra states were almost equal. Gujarat was found to be the least scale
efficient when compared between them. To complement the earlier results, the mean
scale efficiency value was also higher Northern region when compared to Western
region.
Table 4.14 Scale efficiencies in organic input units
CRS TE VRS TE

State (n)

SE

Avg. Gujarat units (13)

0.55

0.93

0.59

Avg. Maharashtra units (4)

0.84

1.00

0.84

Avg. Western region (17)

0.62

0.95

0.65

Avg. Punjab units (6)

0.52

0.58

0.89

Avg. U.P units (17)

0.69

0.80

0.85

Avg. Northern region (23)

0.65

0.74

0.86

The relationship between size of the unit and efficiency is summarized and
presented in table 4.15. The sample units were classified in to three types based on
their vermi-compost production per annum. Most of the sample units (65 per cent)
fell under the category of small with a production of less than 50 TPA. Six and eight
units respectively were grouped under medium and large categories. The results
clearly indicate that there is a strong positive relationship between size of the unit
and its efficiency. As the size of unit increases, all the three efficiency parameters
increased significantly in almost all cases (except in Medium VRS-AE) under both
the CRS and VRS assumptions. From this table we can conclude that the large units
were more efficient than the smaller units.
Table 4.15 Unit size and efficiency relationship
Size of the unit

Distribution
of units

CRS

VRS

TE

AE

EE

TE

AE

EE

Small (1-50 tons)

26

0.51

0.44

0.21

0.80

0.56

0.45

Medium (51-100 tons)

0.81

0.54

0.45

0.82

0.55

0.46

Large (> 100 tons)

0.91

0.68

0.61

0.92

0.73

0.66

130

4.5.9 Factors influencing efficiency of units


The results of regression analysis to identify the factors influencing efficiency (CRSTE, VRS-TE and SE) have been summarized and presented in table 4.16. The three
efficiency parameters were regressed against different socio-economic characters of
the promoters and with some policy related variables (like training and subsidy).
Ordinary Least Square (OLS) method was employed for estimating regression
coefficients in the regression equation.

Review of various research studies has indicated that participation in the formal
training programs had some influence on efficiency (Begum et al., 2009). To
highlight that effect a dummy variable (trained -1, untrained -0) was used to see the
influence of training component on efficiency. Out of the total sample, only 27
(67.5%) promoters had formal training in vermi-compost production through NCOF
and other NGOs. The remaining 13 promoters (32.5%) did not have any formal
training in vermi-compost production. Similarly, researchers (Lakner, 2009) also
concluded that the farms who received environmental payments and investment aid
showed lower efficiency scores when compared to non-beneficiaries. To evaluate
the impact of subsidy on efficiency, six more private units (3 from Maharashra and
one each from remaining three states) which were not subsidized by any means
were added to the existing 40 sample units. However, the sample units (n=40) got
back-ended subsidy ranges from 0.5 lakh to 1.5 lakh per unit either through
NABARD or NCDC. For capturing these effects, a subsidy dummy was used
(subsidized-1, not-0). To perceive state wise effects, three dummies (one each for
Punjab, U.P and Gujarat) were used keeping Maharashtra as a control.

The best fit among the three regression equations was scale efficiency which
exhibited the highest R-square of 0.710. Amongst different factors, size of the unit
was positive and significant at one per cent level. Contribution of family labor was
also positive and significant at 10 per cent level. But, the age of the unit (since no.of
months its operating) showed a negative and significant relation with scale
efficiency. It indicates that the time progresses many units would become scaleinefficient. But, the exact reasons could be due to poor infrastructure of units,
improper maintenance and lack of demand for the vermi-compost in these villages.

131

The dummy for capital incentive subsidy from NABARD exhibited negative
relationship with efficiency. It concludes that with increase in subsidy amounts, the
scale performance of organic input units are decreasing. The dummy for Punjab
state was positively statistically significant at 1 per cent level. This indicated that the
scale-efficiency difference between Punjab and Maharashtra units were significant.
However, the dummies for U.P and Gujarat were also positive but not statistically
significant.
Table 4.16 Determinants of efficiency in organic production units
VRS TE
Coefficient
67.01*
(4.027)
0.056
(0.357)
0.023
(0.183)
0.148
(1.045)
0.127
(0.779)
0.189
(1.006)
0.228
(1.324)
0.063
(0.402)
- 0.536**
(-2.614)
-0.265
(-1.061)
0.262
(0.935)
46
0.505

Variable

CRS- TE
Coefficient
Constant
24.39
(1.321)
Unit size
0.721*
(5.369)
Education
0.002
(0.020)
Family labor
0.283**
(2.328)
Unit age
-0.221
(-1.588)
Own livestock
0.236
(1.468)
Dummy-training
0.280***
(1.905)
Dummy-subsidies
-0.167
(-1.247)
Dummy-Punjab state
0.050
(0.284)
Dummy U.P state
0.133
(0.624)
Dummy Gujarat state
0.194
(0.810)
No of observations (n)
46
R-square
0.638
Figures in the parenthesis indicates t values
* Significant at 1 per cent level
** Significant at 5 per cent level
*** Significant at 10 per cent level

SE
Coefficient
48.37*
(2.984)
0.759*
(6.314)
-0.016
(-0.167)
0.207***
(1.902)
-0.343*
(-2.756)
0.130
(0.908)
0.187
(1.420)
-0.230***
(-1.921)
0.466*
(2.970)
0.316
(1.657)
0.069
(0.324)
46
0.710

The R-square value of regression equation for CRS-technical efficiency was 0.638.
Unit size and family labor variables were positive and statistically significant at 1 and
5 per cent level respectively. The dummy for training component showed positive
relation with technical efficiency. It reveals that attending more no.of training
programs will enhance the efficiency of the units. The dummy on subsidy also
exhibited negative sign with technical efficiency but it was not statistically significant.
When the same independent variables regressed against VRS-TE, the R-square

132

value was 0.505. Only, the dummy for Punjab state showed a negative and
statistically significance at 5 per cent level.
Overall, the size of the unit and contribution of family labor have shown positive
relation with technical efficiency as well as on scale-efficiency. Training programs are
also enhancing the technical efficiency of units. The age of the unit and subsidies
discouraged the scale-efficiencies. Among the four states, the efficiency differences
were significant between the units in Punjab and Maharashtra states.
4.5.10 Checklist for quality parameters
The checklist for quality parameters (as briefly discussed in NCOF manual) of
sample vermi-compost units is presented in table 4.17. The basic qualitative
parameters of a healthy vermi-compost unit were checked for their presence in the
sample organic production units. None of the vermi-compost unit from Gujarat was
having any of the quality parameter. Three out of four units from Maharashtra have
showed all the quality parameters. Only 66.6 per cent of the sample Punjab units
were demonstrated all seven quality parameters. But, in case of U.P, 6 out of 17
units met the standards of healthy vermi-compost unit. On the whole, a fraction of
32.5 per cent of the sample units accomplished the requirements. This indicates the
negligence of the promoters in maintaining the units.
Table 4.17 Checklist for quality parameters in the units (no. of units)
Item
Gujarat Maharashtra Punjab
Uttar
Pradesh
Size of worms

Over all

18

One kg of worms (600-1000)

17

Maturity period (6-8 weeks)

18

No.of cycles per year (5-12)

11

18

Average life span of worms


(2 years)

17

Worms recovery (10 kg per


ton of compost)

18

Multiplication rate (3-7 times


in six weeks)

10

19

4 (66.6)

6 (35.3)

13 (32.5)

(2 inch length and 0.5-1 gm weight)

Over all

0 (0.0)

3 (75.0)

Note: Figures in the parenthesis indicates percentage to total

133

4.5.11 Loan repayment pattern of sample units


The summary of the bank loan repayment pattern of sample promoters is presented
in table 4.18. Out of the total sample, only six promoters have repaid loans
completely. Nearly, 85 per cent of the sample promoters were having unpaid loans
with banks. The average outstanding amount per unit was Rs.2.86 lakh. This amount
was the highest in Punjab followed by U.P, Maharashtra and Gujarat. Interestingly,
the outstanding amount was the lowest in Gujarat. The high repayment payment
capacity in Gujarat might be due to their higher non-farm income sources (like
business). Almost, half of the sample promoters were categorized as regular payers
by the bank authorities. In Maharashtra, all the sample promoters were rated as
regular payers.

Table 4.18 Repayment pattern of sample units (Rs. lakh per unit)
Item

Gujarat

Maharashtra

Punjab

Uttar
Pradesh

Over all

Repay the entire loan


a. Yes
b. No

2
11

0
4

0
6

4
13

6 (15.0)
34 (85.0)

Outstanding amount

1.94

2.32

4.33

3.16

2.86

6
7

4
0

2
4

9
8

21 (52.5)
19 (47.5)

Remarks from Bank


a. Regular payers
b. Irregular payers

4.5.12 Participation in training programs and sources of information


The details of training had by the promoters and different sources of information
available about new technologies for vermi-compost production are presented in
table 4.19. Overall, 67.5 per cent of promoters obtained preliminary training in vermicompost production. The rest of the promoters (32.5 per cent) did not take any
formal training. But, many of them might have had informal exposures through
friends and relatives. Among four states, most of the promoters (15 out of 17) from
U.P have undergone this training. The presence of National Centre of Organic
Farming, Ghaziabad with in U.P might have motivated many promoters to take this
training.

134

Table 4.19 Participation in training programs and sources of information


(n=40)
Item
Gujarat Maharashtra Punjab Uttar Pradesh Over all
Had formal training
a. Yes
b. No

6
7

2
2

4
2

15
2

27 (67.5)
13 (32.5)

Production efficiency#
(scale 1-10)

Extent of technology#
adopted (scale 1-10)

13
0

2
2

4
2

13
4

32 (80.0)
8 (20.0)

Relatives,
Friends

KVK, RCOF

Having technical
collaborations/help
a. Yes
b. No
Major source of
information

Friends,
NCOF, NGOs,
Agri.Dept
ATMA
# based on farmers self-assessment ratings but not from any quantitative analysis

In the same way, the promoters were also asked to rate (scale 1 to 10) themselves
(self-assessment ratings) based on their production efficiency and extent of
technology adopted in the units. Scale one indicates the lowest and ten shows the
highest. On the whole, the average scale for production efficiency of the total sample
was eight. They showed moderately high efficiency of the sample units than the
estimated (actual) efficiencies. Between different states, the efficiency of production
was the highest in Maharashtra followed by U.P. However, the self-assessment
ratings were equal in Gujarat and Punjab.

Similarly, the promoters were also asked to give their self-assessment ratings
(between 1 and 10) in case of extent of technology adopted in their respective vermicompost units. The average scale of extent of technology adoption was eight. This
value was also higher for Maharashtra and lower for Gujarat. Out of the total sample,
80 per cent of the units have technology collaborations with different governmental
and non-governmental organizations. The major sources of information for majority
of units were NCOF, RCOFs, KVKs and NGOs.
4.5.13 Problems in establishment of units
In general, most of the sample promoters did not face any problem in establishment
of vermi-compost production units. Very few promoters expressed difficulties in
Gujarat, Maharashtra and U.P states. But, none of the promoter encountered any

135

trouble in Punjab. The details are listed below by state wise in the text box. Around
15.3 per cent of sample promoters in Gujarat told that they faced problems like nonavailability of worms in the vicinity, lack of sufficient quality cow dung, wild boar
attacks on the compost units and lack of proper guidance from NABARD. Two out of
four Maharashtra beneficiaries felt that they faced problems from neighboring
farmers while establishing units. A lone unit from U.P suffered from heavy rains and
delay in releasing loan amount.
State

Problems in establishment

Gujarat
(15.3)*

Non-availability of worms in the vicinity


Lack of sufficient quality cow dung
Wild boar attacks on the compost units
Not proper guidance from NABARD

Maharashtra
(50.0)*

Problems from neighboring farmers

U.P
(5.8)*

Heavy rains delayed the establishment of units


Problems from bank in releasing the loan amount

* Figures in the parenthesis indicates percentage to total promoters expressed problems

4.5.14 Problems in production of vermi-compost


Around 42.5 per cent of the sample beneficiaries experienced production problems
while operating the vermi-compost units. Just like any other production process,
most of the problems were quite common in vermi-compost production process. The
frequent problem in vermi-compost production was reduction in the outturn during
the rainy season. Attack of rats and termites is a frequent problem in the production
process. The specific problem in case of Punjab state was labor shortage. It
accounts for higher share in the cost of production in Punjab. The major problem in
case of U.P was water due to electricity shortage. In case of Gujarat, dying of worms
due to fluctuations in temperature and unknown diseases is quite evident.
4.5.15 Awareness about the scheme
The summary details of awareness about NPOF scheme among the promoters is
presented in table 4.20. Nearly 16 out of 40 promoters got information about NPOF
scheme from friends/ others. NABARD and Bank officials also played a major role in
creating awareness about the scheme. The major problem among the borrowers
was development of suitable proposals for the commercial banks. About 25 out of 40
sample farmers were approached Brokers or Consultancy services for development

136

of proposals. The average proposal development charges paid by the promoters


were very high in U.P state when compared to other states.
Table 4.20 Awareness about NPOF scheme (no of units)
Item
How you knew about scheme
a. Bank person
b. NABARD
c. Brokers
d. Friends/others
Who prepared the proposal
a. Own
b. Friend
c. Broker / NABCons
Proposal development
charges paid (range)
Are you aware of contents in
proposal a. Yes
b. No
Overall opinion about the scheme
a. Average
b. Good
c. Excellent

Gujarat

Maharashtra

Punjab

Uttar Pradesh

11
0
1
1

1
0
0
3

0
0
0
6

1
10
0
6

7
0
6

2
0
2

2
4
0

0
0
17

5000-7000

5000-8000

3000-5000

25000-30000

8
5

4
0

6
0

6
11

3
7
3

0
3
1

0
6
0

3
12
2

Only 60 per cent of the sample promoters were aware of the contents in the proposal
submitted to commercial banks. Overall, 28 promoters out of 40 opined that the
NPOF scheme is Good.
4.5.16 Role of training programs and subsidies
The influence of training programs on efficiency of vermi-compost units is
summarized in table 4.21. As presented in the previous sections, around 27
promoters had formal training in vermi-compost production either in NCOF or other
NGOs. The remaining 13 did not undergo any formal training. The results clearly
indicate that there are significant differences in mean capacity utilization of units
between trained and non-trained group promoters. The average cost of production
per quintal of vermi-compost for trained promoters was Rs.307 while the same for
non-trained was Rs.340. Similarly, the mean CRS and VRS technical efficiency
values were marginally higher under trained promoter units than non-trained units.
But, the mean allocative efficiency values were relatively higher in non-trained units.
However, economic efficiency of vermi-compost units showed a mix trend under
CRS and VRS production technologies. In case of scale efficiency, the results are
conspicuous and higher under trained promoter units. Overall, the results conclude

137

that participation in training programs will enhances the production skills of the
promoter as well as technical efficiency of units.

Table 4.21 Role of training programs on efficiency


Item

Trained (n=27)

Non-trained (n=13)

Capacity utilization (TPA)

82.4

68.6

Cost of production/qtl

307.0

340.0

Mean CRS-TE
Mean CRS-AE
Mean CRS-EE
Mean VRS-TE
Mean VRS-AE
Mean VRS-EE
Scale efficiency

64.9
49.8
33.0
83.7
57.9
48.3
79.0

61.2
53.3
32.9
82.8
62.6
54.3
75.0

The impact of subsidy on efficiency of vermi-compost units is presented in table


4.22. To compare the influence of subsidy on efficiency, six more non-subsidized
vermi-compost units were included in the analysis along with sample (n=40) units.
Table 4.22 Impact of subsidy on efficiency
Item

Subsidized units
(n=40)

Non-subsidized
units (n=6)

Capacity utilization (TPA)

76.2

173.6

Cost of production/qtl

286.0*

196.0

Mean CRS-TE
Mean CRS-AE
Mean CRS-EE
Mean VRS-TE
Mean VRS-AE
Mean VRS-EE
Scale efficiency

63.7
50.9
33.0
83.4
59.4
50.2
77.7

78.8
57.5
46.4
83.0
64.2
54.3
94.5

* weighted average cost of production

The mean capacity utilization of non-subsidized units was 173.6 TPA. It was much
higher than the mean sample capacity utilization (76.2 TPA). The weighted average
cost of production of vermi-compost per quintal was Rs.286 for subsidized sample
units. But, the same for non-subsidized units was Rs.196. The high scale and

138

technical efficiencies in non-subsidized units are may be reasons for low cost of
production. Almost all mean efficiency values were higher in non-subsidized units
than subsidized units under both CRS and VRS production technologies. There is a
huge difference in scale efficiency values between these two groups. The results
strongly lend support that the subsidy discourages efficiency in vermi-production
units.
4.5.17 Suggestions for promoting organic input units
The suggestions for further promotion of organic input units were collected from the
respondents during field visits. They were many but encapsulated them in the
following items:
a. Prompt and timely JMC visits: The prompt and timely Joint Monitoring
Committee (JMC) visits are the need of the hour. The delay in JMC visits was
conspicuous in all the four states. Even in our sample of 40 units, 12 units so
far did not complete their JMC visits. In some cases, the JMC visits were
happening after more than two years of establishment units.

b. Quick and timely release of subsidy: Most of the sample units did not face
any problem in receiving the advanced subsidy. But, they were facing lot of
problems in getting the final subsidy. After the delay in conduct of JMCs, the
release of final subsidy was also buying lot of time. Most of promoters
suggested that the total subsidy should be transferred through banks directly
instead of NABARD (just as in case of PMRY schemes). Although the study
results proved that subsidies discouraged efficiency, NABARD has to find an
innovative way of financing them.

c. Buffaloes, training and insurance should be integral part of the scheme:


One of the major suggestions received from the promoters was; integration of
sufficient no.of buffaloes, training in vermi-compost production and insurance
for production losses if any as part of the ongoing scheme. So, the promoter
would not face any difficult in getting quality raw material as well as technical
assistance.

139

d. Easy licensing and certification help is needed


Licensing and certification of vermi-compost is having the prime importance in
marketing/exporting. Many promoters were completely unaware of this
process. They even dont know where the labs are and who will certify it. Low
cost of licensing and certification would help in easy marketing and fetching
premium prices.

e. Supply of quality worms at cheaper rate


The long term sustainable production and quality of the vermi-compost will
depends upon quality of seed stock. It also influences the worms health, their
multiplication rate, no.of cycles per annum and recovery rate etc. The
availability of such seed stock should be abundant and cheaper. This was the
biggest problem in Gujarat state. Certain parts of Gujarat is also prone to
extreme temperatures in summer and floods in rainy season. Earth worms are
highly susceptible to these extreme climatic aberrations. A resistant species to
this situation is the need of the hour to revamp the vermi-compost units in
Gujarat.

f. NABARD/ State Government/ State Agricultural Department intervention


in marketing of vermi-compost
This was the second major suggestion received from the promoters in four
states. All the promoters are looking for some window of marketing support
either from NABARD or State government or state Agricultural department.
The establishment of organic input marketing channels is necessary to
encourage nascent organic farming in India. Other wise, Indian Farmers
Fertilizer Cooperative Limited (IFFCO) should take an initiative in marketing
vermi-compost just like how its market for inorganic fertilizers in India.

g. Encouragement of organic inputs usage by subsidization


The government is paying huge subsidies for inorganic fertilizers in the
country. The indiscriminate usage of these fertilizers resulted in land
degradation, nitrate losses and environmental pollution besides creating a
very unsustainable system for mankind. Keeping the long term benefits of
organic farming in mind, the government should subsidize the usage of
140

organic inputs. So, it not only encourages the farmers use but also reduces
social costs.

h. Creation of market demand by promoting more awareness programs


The government has to take a proactive role in advocating and promoting the
organic farming in the country. Just like in the developed countries, the
government should initiative the process for establishment of Green markets
exclusively

for

organic

food.

The

growing

health

awareness

and

encouragement of organic farming through conversional incentive schemes


will definitely enhance the demand for organic inputs in the country.

i. Further increase in subsidy upper limit


The major problem facing by the promoters was fixation of upper limit of
subsidy. The upper limit of subsidy i.e., 1.5 lakh for 150 TPA of vermi-compost
unit was decided almost five years ago. But, due to increase in the costs of
establishment of vermi-compost unit, the upper limit on subsidy should be
increased further. It will boost the setting up of more organic production input
units by small and marginal farmers in the country.

***********************

141

Chapter V
Cases on organic input units

Case study is one of several ways of doing research whether it is social science
related or even socially related. It is an in-depth investigation/study of a single
individual, group, incident or community. Rather than using samples and following a
rigid protocol to examine limited number of variables, case study methods involve an
in-depth, longitudinal examination of a single instance or event: a case. They provide
a systematic way of looking at events, collecting data, analyzing information, and
reporting the results. As a result the researcher may gain a sharpened
understanding of why the instance happened as it did, and what might become
important to look at more extensively in future research. Some times, case studies
lend themselves to both generating and testing hypotheses. Thus, this chapter put
the thrust on eight cases among the three types of organic inputs. Two cases each
were chosen from fruit and vegetable waste unit and vermin-hatchery unit and four
on bio-fertilizer units (three NABARD + one NCDC sample).

Case one: Organo Phos (fruit and vegetable waste unit)

Sustainable agriculture means maintaining an agricultural growth rate to meet the


increasing demand for food without hampering the basic resources, is a step towards
sustainable development. Modernization of Indian agriculture, started with green
revolution using high yielding varieties of seeds, chemical fertilizer, pesticides,
growth agents and irrigation water, has resulted in not only soil degradation and
pollution; but also yielded an unsustainable agriculture system to man kind. Farmers
have realized the harmful effects of long-term use of chemical fertilizers and
pesticides because the crop yields are decreasing in spite of additional doses of their
application. They not only pollute the environment but also contaminate the
underground water due to leaching of nitrates. The only solution to these problems is
Organic farming.
Product development
Phosphorous is one of the most important 15 nutrients, essential for plant growth.
About 98% of Indian soils are low to marginal in availability of phosphorous.

Researches on use of phospho-compost as a fertilizer in relation to yield of crops


have been widely investigated under different field conditions through long term field
experimentations. The results revealed that yield with phospho-compost supplying
60 kg P2O5/ha were much superior to single super phosphate applied at the same
rate. Thus, it was scientifically proved that phosphatic chemical fertilizer can
effectively and efficiently be replaced by phospho-compost. To take these benefits
forward, Mr.S.P Puri has developed a product called Organophos by using fruit and
vegetable waste products.
Company profile
It is a joint venture between M/s Spiral services and Delhi Government for a period of
30 years to manufacture organic manure form fruit and vegetable wastes (FVW). As
per the agreement, Agriculture Produce Market Committee (APMC), Azadpur, Delhi
provides 150 tons of waste material per day to the plant site. It was started with the
mission of timely supplying of good quality organic manure at affordable price and in
the same time helping to bring an organic revolution. Spiral Services is a
proprietary concern of a retired officer Cdr. S. P. Puri. He has diversified experience
in various fields and exceptional managerial qualities. He is a well educated person
having an excellent service record of 21 years of meritorious service in Indian Navy.
He was heading Nature & Waste Management (I) Pvt. Ltd. as Director and had set
up a MCD Compost plant at Bhalswa for converting 500 TPD Municipal solid waste
into compost. He was also Director of M/s Khurana Eco-friendly ventures (P) Ltd.,
which is involved in the process of reviving the Okhla compost plant of MCD for 300
TPD capacity. He was honored with an International felicitation for outstanding
contribution in the areas of National Building, Planning Development and
Environment protection by World Environment Congress in December 1997. He has
started this company i.e., Spiral services in order to make use of his ability and
experience gained. This plant has formally started its production of organophos in
July 2001. The plant is situated at almost 6 acre land just outside of Delhi city. He
spent more than Rs 160 lakh to set up this huge plant with 200 ton per day (TPD)
capacity having a big concreted yard and processing shade with machineries and
transport systems. Very good quality research and developments, strong technical
backup from the best brains of the country from all fields of agriculture has made the

143

company pioneer in this field. Their state-of-the-art infrastructure, backed with


technologically advanced tools and machineries, assisted in the quality and quantity
production of eco-friendly products. But, currently the plant is now working at 36% of
its capacity due to lack of demand.
Type of Products
Bio-fertilizers, handmade papers and organic manures are three main eco-friendly
products of the company. Ensuring the quality and effectiveness in varied grades,
meeting the international quality standards, the demand of these products are
enhancing day by day.
1. Bio-fertilizers
These are products which help in increasing productivity and enhance the nutrient
availability to crop plants. Microbial bio-fertilizers, containing of living cells of
organisms like bacteria, algae, fungi alone or in combination, help in the fixation of
nitrogen, solubilization of insoluble fertilizer materials, stimulating plant growth, plant
root protection or decomposition of bio-degradable material and plant residues. The
products in this category can be classified as following:
Organo-Rhizobium
Organo-Azotobacter
Organo-Azosiprillum
Organo-PSB
Organo-Algae
2. Handmade papers
They are one of the prominent manufacturer and supplier of good quality and
finished handmade papers, having various applications, in India. They use ecofriendly materials and advanced technology to produce handmade craft papers in
varied thickness, colors, designs and patterns as per the specifications provided.
3. Organic manure (Organo phos)
This is the main product of the company. It is very useful as base fertilizer for crops,
especially in areas where botanical beneficial bacteria is less in number or there is
imbalance of micro flora. These bacterial inoculants as it slowly but are continuously
releases nutrients to the soil. This organic fertilizer, produced by blending organic

144

materials like fruits and vegetables residues, leaves etc. It is available at hygienically
paced in HDPE bags weighing 5 Kg, 10 Kg and 50 Kg.

Raw materials and manufacturing process


Fruit & vegetable waste from the vegetable markets of Delhi is being used as the raw
material which contains all the nutrients in balanced form. They are using aerobic
microbial

composting

technology

where

they

are

doing

controlled

fermentation/degradation, resulting in production of enriched compost with desired


specifications and devoid of toxicity. The output of this process, mixed with microbial
cultures such as Cellulolytic, Lignolytic and various useful microbes like Azotobactor,
Phosphate Solublizing Bacteria/fungi (PSB) etc. Thus, the final form of the manure
obtained namely Organo phos. Before packing, the product is tested in lab for its
organic quality such as humus content, organic carbon, nitrogen, phosphorous,
potassium and micronutrients including the population of useful bacteria, fungi and
actinomyctes present in the final organic manure. The final product, black in color, is
having 12% organic carbon according to FCO test where as 16-18% according to
NBS test. Availability of nitrogen is almost 15-20% whereas moisture content is
about 15-25%. They are maintaining pH in between 6.5 to 7.5 which is on par with
normal rate.
Unique properties and benefits
Organo phos should be used in the field before sowing or during the first or second
irrigation for getting its maximum benefits. It should be mixed with garden soil five
days before planting the seed or sapling. The nutrient contents in organo phos are
presented in the table below. The various benefits one can enjoy using the product is
depicted in the figure 5.1.
Nutrient contents
Organic Matter (%)
Organic Carbon (%)
Phosphorus (P O) (%)
Calcium (%)
Sulphur
Zinc (ppm)
Copper (ppm)
Microbial population

Around 50
15-20
2-5
1-3
1-3
100-150
20-50
10 -10

pH
Nitrogen (%)
K2O (%)
Magnesium (ppm)
Iron (%)
Maganese (ppm)
C: N Ratio
Enriched With

145

6.5-7.5
0.5 to2.0
1.5 to 2.5
0.5-1.0
0.5-1.0
200-500
(20+/-5):1
AZOTOBACTOR & PSB

Figure 5.1 Benefits about Organophos


Recommended doses
Fruit Trees
Mango, Grapes, Litchi, Ber, Guava, Apple
Adoo, Chiku, Lemon, Amla, Loquat, Phalsa, Kiwi
Papaya, Karonda, Pomegranate
Flowers
Rose, Cornation
Gladioli, Marigold, Rajnigandha
Grass / Lawns
Seedbed / Nursery
Pots (For Filling)
(For Maintenance)
Ornamental plants and bushes
Medicinal herbs/ shrubs

6 Kg / tree
4 Kg. / tree
2 Kg. / tree
300 gms / Sqm.
200 gms / Sqm.
500 gms / Sqm.
1 - 2 Kg / Sqm.
1:3 with soil
50 - 200 gms / Pot
250 gm / plant Or 500 gms / Sqm.
300 - 800 gms / Sqm.

Other crops
Type of Crops
Rice, Wheat, Maize, Jowar
Tilhan / Sunflower, Bajra
Sugarcane
Brinjal, Tomato, Gourd, Cabbage
Cauliflower, Bitter Gourd
Onion, Garlic
Tobacco

Kg. per
acre
250
200
350
150
350
250
500

Type of Crops
Rajma, Sarson, Sunflower
Soya bean, Burseam
Potato, Tobacco
Ladyfinger, Chilly
Carrot, Radish, Methi
Sweet Potato, Chukandar
Tea

146

Kg. per
acre
200
300
500
200
200
250
400

Marketing
They are supplying their products to various important places like Presidents house,
Prime Ministers house, Himachal Pradesh Government, different embassies, many
hotels, nurseries, corporate houses, housing societies, builders and developers, farm
houses, vegetable growers, flowery culture and kitchen garden associations in and
around Delhi. But, they also encounter problems in marketing the compost. Mr.Puri
opined that the lack of demand, cost of compost and sales on credit basis are the
major bottlenecks in marketing.
Summary details about organophos unit
Sanctioned capacity

200 TPD

Installed capacity created so far

125 TPD

Current production

45 TPD

Capacity utilization rate

36 %

Financial Bank

Union Bank, Azadpur, New Delhi

Status of JMC

Completed

Status of final subsidy

Pending

Rate of Interest

14.25 per cent

License/FCO

Approved

Working days per annum

365 days

Recovery rate

22 per cent

Gestation period per cycle

4-5 weeks

Raw materials cost

2.5 per cent of gross income

Cost of production per Kg

Rs.1.90

Method of marketing

Direct channel

Rating for market demand

Poor

Opinion about the NPOF scheme Good


Suggestions/Recommendations
Mr.Puri gave few suggestions for strengthening of fruit and vegetable waste units in
India. They are: increase the subsidy component up to 50 per cent, providing some
form of security for obtaining the loans from financial banks and implementation of
Supreme Court orders i.e., use of one bag of organic manure for every 1.5 bag of
inorganic- fertilizer use. He also requested for advertisement and publicity subsidies

147

for organic input units. He emphasized the need for more training, education and
awareness among people towards organic food. Some of the setbacks in the
production process he mentioned are influence of rains during monsoon season,
labor problems, breakdown of machineries etc.
Overall, use of organic manures like Organophos not only increases agricultural
production in case of cereals, leguminous, oil seeds crops but also raises the
productivity of sugarcane, horticulture/floriculture crops, forage grasses and
medicinal plants. It also increases soil health, protects environment from getting
polluted thus helps mankind and animals. This kind of plants should be replicated
through out the country to fight the menace of solid waste management and threat of
depleting soils due to imbalanced use of chemical fertilizers and pesticides.

Organo phos factory

5 kg packet of Organo phos

Case two: J. K. Fertilizers (fruit and vegetable waste unit)


Being a farmer the promoter of the company, closely associated with farmers and
dealers of the fertilizer across the country. They are involved in manufacturing of
organic fertilizers and providing services right from initial stage of sowing to supply of
finished products on time. Company offers a different range of organic inputs for
sustainable agriculture and horticulture crops. These products specifically address
the serious modern day concerns about environmental degradation and the threat
posed to human health as a result of chemical inputs. Their organic inputs are biodegradable, environment friendly, protect crops naturally and at the same time help
to increase crop yield.
148

Company profile
J.K. Fertilizer is the one of the leading firms manufacturing the organic fertilizers in
the Central Gujarat. They are the manufacturer of good quality organic manures
under the brand name called Bhoomiras. The manufacturing unit is situated at
village Adas, by the side of National High way No 8A in Anand district of Gujarat (just
about 10 Km away from Anand and 3 Km away from Vasad). It was established on
23rd November, 2006 with an intention to manufacture of organic fertilizer with the
use of various types of fruit and vegetable waste and compost material. The main
aim and objective of the company is to fulfill customers requirement of best quality
organic fertilizer at affordable price. The main objectives of the company are:

To promote organic farming in the country by making available of the organic


inputs such as bio-fertilizer, vermin compost and fruit and vegetable waste
compost and there by better returns for produce

To increase the agriculture productivity while maintaining the soil health and
environmental safety

To reduce the total dependence on chemical fertilizer by increasing the


quantum of quality organic inputs

To convert the organic waste in to the useful plant nutrient resources

To prevent pollution and environmental degradation by proper conversion of


organic waste

Infrastructure and manufacturing


The unit is strategically located in 1.8 acres area between Anand and Vasad. It has
all the infrastructural faculties including machinery, labour, water, electricity,
transport, storage godown and raw materials availability (from Anand city). The
company made tie-ups with Anand Municipal Corporation for lifting the fruit and
vegetable wastes from market yards. The location of the unit is also known for its
agro-based products like rice waste, tobacco waste, wheat waste, poultry manure,
bone meal etc. Growing awareness among farmers is also helping the company to
get raw material for longer term sustainability of the project. The method of compost
preparation is aerobic process. They use inoculants/cultures and cow urine for quick
decomposition of waste materials. The project also obtained a No Objection
Certificate from the concerned authorities. The company is having its own research
and development centre with in the premises.

149

Type of products
The balanced application of N is a must for higher production. But, indiscriminate
use of chemical fertilizer is causing harm to the quality of land. The soil is losing its
vigor and becoming less productive. Thats why scientists are advising use of
organic manures for long term sustainability of the soil. Their environment friendly
products are produced in totally organic manner by mixing different natural input
materials in proper percentages. These products increases soil fertility makes the
soil soft and enhances plant growth. It also protects the plants from different pests
and diseases. They are selling their products under three different brand names i.e.,
Bhoomiras, Revive and Amrut. They merely differ in percentage of micronutrient
contents in them. All the products are having about 16% organic carbon, C: N ratio of
20:1 and moisture content at 15-20%. J.K Fertilizers supplies the best quality organic
inputs in to the market. All products are produced in strictly controlled process and
supervision. Testing on a regular basis helps to achieve consistency in providing
excellent quality. Specific testing regimes such as lot sample testing will be done on
regular intervals by a third party.
Different raw materials used in Bhoomiras
Sl no

Raw material

Available Nutrient

Swabin waste

N, P, K and Micro nutrients

Bacteria

Raizobium, Azitobactor, Phosphetbactor

Sugarcane waste

N, P and K

Poultry manure and waste

N, P, K and Micro nutrients

Cow dung

N, P, K and Micro nutrients

Ash

P and K

Castor waste

N, P, K and Micro nutrients

Cow urine

P and Mg

Swabin oil

N, P, K and Micro nutrients

10

Bone meal

Ca, P and Zn

11

Tobacco

Nicotine

12

Wheat, rice, and other agro wastes

N, P, K and Micro nutrients

13

Fruit and vegetable wastes

N, P, K and micro nutrients

150

Comparison of nutrients in Bhoomiras, cow dung and vermi-compost


Nutrient
N
P
K
Ca
Mg
S
Fe
Mn
Zn
Cu
B
Mo
Organic
materials
PH

Bhoomiras
3%
2.5%
1.5%
5%
1%
0.5%
1600 ppm
280 ppm
250 ppm
40 ppm
10 ppm
3 ppm
50-60%

Cow dung
0.5%
0.2%
0.5%
1%
0.3%
0.5%
300 ppm
250 ppm
100 ppm
20 ppm
5 ppm
2 ppm
40-60%

Vermin Compost
1.6%
0.7%
1.2%
0.4%
0.3%
0.3%
100 ppm
150 ppm
150 ppm
35 ppm
5 ppm
2 ppm
30-40%

6.8

7.2

Bhoomiras recommended doses in various crops


Crop name

Time of use

Qty per Bigha

Wheat, Rice, Cumin, Jawar, Bazra, Maize

Before planting

3 5 bags

Ground Nut, Castor, Tobacco, Swabin

Before planting

3 5 bags

Banana, Sugarcane

Before planting

10 bags

Flowers

After planting

2 bags in every 3 months

Fruits like mango, Grapes, Chickoo, Orange

Up to 1 5 years
After 8 years

2 bags
4 bags

Chili, Tomato

Before planting

4 5 bags

Turmeric, Onion, Garlic, Potato, Oil seeds

Before planting

4 5 bags

Cotton

Before planting

2 3 bags

Unique features of Bhoomiras


Best for the soil reclamation/ improvement
It is free from weed seeds and also prevents weeds germination
It decomposes alkaline and poisonous substance from soil and keeps soil at
neutral level
Free from all the chemical ingredients, so crop yields also free from chemical
residues
It helps in multiplying the population of earthworms and bacteria in the soil
Checks soil born diseases & fungal diseases like yellowing and reddening of
plants
It contains high amount of NPK and other micronutrients

151

Marketing
J. K Fertilizers believes in direct relationships between the company and its
customers. They are using both direct and indirect marketing channels for marketing
of organic inputs. Under indirect approach, marketing is done through dealers as well
as state agricultural department. But, the lion share of output is marketed through
dealers (70 per cent). Thus, they always offer competitive prices and supplies goods
to customer requirements in time. They have multi-skilled professional marketing
personnel who take care of all problems arise while using them in field. Adoption of
different strategies in marketing might be helping the company to do the business
well. Due to its high demand from market, the cent per cent installed capacity of the
unit is being in use.
Summary details about J.K Fertilizers unit
Sanctioned capacity

7500 TPA

Installed capacity created so far

7500 TPA

Current production

7500 TPA

Capacity utilization rate

100 per cent

Financial Bank

Axis Bank, V.V Nagar, Anand

Status of JMC

Pending

Status of final subsidy

Pending

Rate of Interest

10.5 %

License/FCO

Approved

Working days per annum

365 days

Recovery rate

80 per cent

Gestation period per cycle

6-8 months

Raw materials cost

Rs.900 per ton

Method of marketing

Direct and indirect methods

Rating for market demand

Good

Opinion about the NPOF scheme Good

152

Cost and returns from FVW compost unit (Rs lakh per annum)
Item

Amount

Raw material costs

60.00

Culture/inoculant cost

3.60

Water charges

0.45

Labor charges

18.00

Packing cost

22.00

Marketing costs

25.00

Power charges

0.24

Transport charges

18.00

Tax and insurance etc

0.22

Repairs and maintenance

0.45

Interest on working capital

12.00

Total costs

159.96

Total production (ton)

6000^

Gross returns

198.00

Net returns

38.04

Cost of production (Rs/kg)

2.66

Benefit cost ratio

1 : 1.23

^ recovery rate @ 80 per cent


The results from the above table clearly reveal the potential for fruit and vegetable
waste compost production in Anand, Gujarat. The unit cost of production was
Rs.2.66 per kg. The net return from the unit was Rs.38.04 lakh per annum. The
company was selling the output at rate of Rs.3.3 per kg. The benefit cost ratio for the
unit was 1: 1.23. It is a significantly good margin in this sector.
Suggestions/ Recommendations
Mr. Jiten R Vachhani, promoter of the unit gave suggestions for effective
implementation of the scheme. He expressed that the development of NABARD
guidelines and subsidy calculations for establishment of fruit and vegetable unit was
done almost five years ago. But, due to the escalation in establishment costs, the
current subsidy amount of Rs.40 lakh is not sufficient for establishing a new fruit and
vegetable waste unit. So, there is a need for revision of these estimates for
encouraging more promoters. He also stressed the need for establishment of

153

marketing channels and availability of market information. He opined that the easy
documentation process and more awareness programs would attract more
entrepreneurs in to this venture.
The company manufacturing the organic fertilizers best suited for echo-socio
balance and healthy food production. Honesty, quality and value added services are
the principles of JK Fertilizers which helped them to achieve faster growth in the
shorter time. Their long lasting supply relationships and use of complete line of
superior quality ingredients made Bhoomiras as special trade mark. Given the best
resources availability, aggressive investment and thoughtful risk-taking moved the
J.K. Fertilizers to the top position in Gujarat state.

IIMA study team along with the promoters

Bhoomiras packets

Case three: Agriland Bio-tech (Bio-fertilizer unit)

Agriland, a company promoted by the scientists with rich experience in the field of
entomology and plant pathology is committed to scale up and commercialize
biological plant protection and plant nutrition products. Right from the inception, the
company has substantially been active in the promotion of biological products and to
be with the tradition. Agriland is striving hard to develop environmentally sound
products to keep the pace with changing farming scenario in WTO regime.

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Company profile
Agriland incorporated as the private limited company in 1994. The plant and their
office are situated at Motamotipura, in Baroda district, Gujarat. It was promoted by
technocrats with an experience over 15 years in the area of research and
development of environment friendly plant protection products. One of the
promoters, Mr. Mukesh J. Patel is a young, dynamic and enthusiastic person. After
passing M.Sc. in Agriculture with specialization in Plant pathology, he did three P.G.
Diplomas in Business Management, Export and Import Management and Marketing
Management. He participated in various national seminars, conferences, workshops,
symposia and acquired the rich experience in the field of agri-biotechnology. The
other promoter, Mr. Ramji Mangukia, is a very result oriented person. He passed
M.Sc. in Agriculture with specialization in Agricultural Entomology. He has written
various papers and scientific reports on the subject of Agricultural biotechnology and
worked earlier with Coromandel Indag Products (I) Ltd, Chennai. He also worked
with M/s Gujarat State Fertilizers Company Ltd, Baroda.
The company has been pioneer in promoting eco-friendly agricultural inputs. During
the span of last 16 years, company has launched diverse range of products. Among
them, the main products i.e., Monitor (Bio-fungicide), Yorker (Bio-nematicide) and
Biosoft (Bio-insceticide) were the first of their kind in India. Apart from these
products, the company has also launched many complimentary products which will
help farmers to boost their incomes. Basically, it is a non-pollutant company.
Moreover, it controls pollution indirectly by replacing toxic chemicals and pesticides
with bio-pesticides in crop protection. All the bio-pesticides are bio-degradable, not
harmful to flora and fauna including human beings. The company has been a leader
in helping the Department of Agriculture, Gujarat State and the Govt. of India in
standardization and registration of various biological products for legal purposes.
The company participated in various extension activities like krishi mela, farmers
training, seminars, exhibitions and shouldered the responsibility to train government
extension officials. The company has the track record in supplying its products
successfully to the Departments of Agriculture in many States like Gujarat, M.P.,
Chhatisgarh, Zharkhand, U.P and Rajasthan.

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Infrastructure and growth plans


The company has its own land of 146840 Sq. feet on which the manufacturing plant
has been constructed in 14500 sq.feet area. The company has separate
administrative, laboratory and training facilities with in the premises. They have good
transportation facility of six four wheelers and twenty two wheelers exclusively for
field and marketing activities. They also have latest computer software systems
through which the information on references and crop production practices are
maintained and updated. The company is having almost all state-of-the-art facilities
right from manufacturing of the bio-fertilizers to packaging.
The company has recently established a modern R & D centre of 6500 square feet in
the factory premises. The company is active in research and development with a
massive objective of Lab-to-Land. The company is active in the research of key
aspects of formulation and appropriate product delivery system that has direct
bearing with the substantiation of laboratory findings to the large scale field
applications especially of the products like entomopathogens, fungal antagonists,
nitrogen fixers, phosphate solubilizers and biotic stress defending organisms. The
company has an excellent investment plan in research and development of these
areas with site specific product delivery systems. Looking to the current need, the
company has framed a strategy to add still more unmatched quality products that
can be complimentary to the present range and to expand production and marketing
horizontally so as to achieve faster growth rate. The company is striving hard to
launch newer products for taking the competitive advantage for some years
simultaneously with the horizontal market expansion.
Type of products
1. Bio- pesticides
Product name

Use

Monitor

Trichoderma viride based biofungicide

Yorker
Biosoft
Vertisoft
Vanguard

Paecilomyces lilacinus based bionematicide


Beauvaria bassiana based bioinsecticide for lepidoptera insects
Verticillium lecanii based bioinsecticide for the management of sucking pests
Neem based botanical insecticide (Azadirachtin 300 ppm , 1500 ppm and 1500
ppm )
Broad spectrum botanical insecticide
Pseudomonas flourescens based product having fungicidal, nematicidal and plant
growth promotiing activities
Metarhizium anisopliae based bioinsecticide for the control of grubs, termites and
Sucking insects

Horsepower
Sudozone
Metasoft

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2. Bio-fertilizers (Talc based)


Product name
Biofield L

Biofield G
Agriland Azoto WP
Agriland Azoto L
Agriland PSM WP
Agriland PSM L
Agriland KMB

Use
Sea weed extract, Humic acid, Nitrogen fixation bacteria and Phosphate
solublisation bacteria based liquid formulation for spray as complete food for
plant growth.
Sea weed extract, Humic acid, Nitrogen fixation bacteria, Phosphate
solublisation bacteria and VAM based granular formulation for soil application.
Nitrogen fixation bacteria, Azotobacter chroococcum for seed treatment and
soil application.
Nitrogen fixation bacteria, Azotobacter chroococcum for spray application.
Phosphate solubliser bacteria Bacillus coagulans and Torulospora globossa
for seed treatment and soil application.
Phosphate solubliser bacteria Bacillus coagulans and Torulospora globossa
for spray application
Powder and liquid form of Potash Mobilizers

3. Insect sex pheromones


Product name
NoMate
Pheromone Traps
NoMate
Pheromone Lures
NoMate Life
TimeTraps &
blocks

Use
Sex pheromones trap devices for male insects.
Sex pheromone lures of seven economic important pests viz. Helicoverpa
armigera, Spodoptera litura, Earias vitella, Pectinophora gossypiella, Plutella
xylostella, Leucinodes orbonalis and Scirpophaga incertulus.
NoMate Life Time Traps and Lures for Fruit fly of fruit crops (Bactrocera
dorsalis/correctus/zonatus) and vegetable fruit fly (Bactrocera cucurbitae).

4. Other supporting products


Product name
Gibra
Agrisulf
Saffron
Apna-80
Spectrum

Use
Gibberellic acid technical
Wettable sulphur
Micronised liquid sulphur
Non-ionic Adjuvants
Multifunctional Growth Elements for flowering and fruit setting

Marketing
The company is harnessing its full strength for promotion of various products in the
field. They have many well educated and trained staff for promotional activities. The
wide range promotional activities of company might have helped for better marketing
their products. They have very strong dealer and distributor network across the
country. They also have well established marketing linkages with many organizations
like Gujarat State Fertilizers and Chemicals, Baroda; M.P. Agro Industries
Corporation LTD, Bhopal; M.P. Marketing Co-operative Federation Ltd, Indore; Tarai
Development Corporation LTD, Uttaranchal, Mother dairy food processing LTD,
Anand; Chhatisgadh Agro Industries Corporation Ltd, Raipur; Chhatisgadh Marketing
Federation Co-operative Ltd, Raipur; Gujarat State Sugarcane Federations LTD etc.
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They also supply to the companies like Godrej Agrovet Ltd, United Phosphorus Ltd
and Mahindra Shubh Labh Ltd. Some of their promotional activities are:
On field products demonstration
Effective follow up in post demonstration period
Farmers meeting and educating them
Distribution of literature in local language
Advertisement in local TV channels
Educating dealers/traders
Attending the meeting of extension workers and making them aware of
products and their applications
Periodical visit to University scientists to keep themselves updated for newer
developments especially on applications
Sponsoring research programmes to the Universities for development of the
products in newer crops
Working actively in different crop development and plant protection
programmes undertaken by state department of agriculture and supplying
them the products as per their requirements and thereby propagating the new
concepts harmoniously with the state extension wing
Summary details about Agriland Bio-tech unit
Sanctioned capacity

150 TPA

Installed capacity created so far

150 TPA

Current production

150 TPA

Capacity utilization rate

100 per cent

Financial Bank

State Bank of India, Baroda

Status of JMC

Completed

Status of final subsidy

Received

Rate of Interest

12.75 per cent

License/FCO

Obtained

Working days per annum

300 days

Recovery rate

90-96 per cent

Gestation period per cycle

5 days (60 cycles per annum)

Raw materials cost

Talc Rs.5500 per ton

Cost of production per kg

Rs.75 (including all costs)

Method of marketing

Through 6-7 channels

Rating for market demand

Good

Opinion about the NPOF scheme Good

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Cost and returns from bio-fertilizer unit (Rs lakh per annum)
Item

Amount

Raw material costs

5.62

Culture/inoculant cost

0.35

Media preparation cost

18.58

Water charges

0.21

Labor charges

0.67

Salaries for technical persons

14.40

Packing cost

15.00

Marketing costs

25.00

Power charges

1.10

Transport charges

5.00

Tax and insurance etc

3.00

Repairs and maintenance

6.00

Interest on working capital

10.00

Total costs

104.93

Total production (ton)

142.50^

Gross returns

162.50

Net returns

57.57

Cost of production (Rs/kg)

73.63

Benefit cost ratio

1: 1.54

^ recovery rate @ 95 per cent


The above results clearly lend more support for establishment of bio-fertilizer units in
the country. The average cost of production of bio-fertilizer (both liquid and power
form) was Rs.73.89 per kg/lit. The unit obtained a net margin of Rs.57.57 lakh per
annum. The benefit-cost ratio calculated for this investment was 1: 1.54. The results
summarizes that the investment under these units was highly profitable.

Suggestions/problems
Mr.Mukesh Patel has shared some of his suggestions and problems in the biofertilizer production. Initially, he faced a lot of problems from Gujarat, NABARD office
because there was no technical person to understand his proposal. His company
also experienced the difficulty in delay of JMC visit. He also advised that the NCOF

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should conduct more awareness and training programs about bio-fertilizer benefits.
Similarly in case of marketing; he is facing a stiff competition from Gujarat Fertilizers
because Gujarat state government is subsidizing their products. Low awareness of
the farmers as well as slow results of bio-fertilizers is making hard to market the
products. In some cases, government field demonstrations were not allowing to test
these products.
The company has already expanded its production once in the year 2000 and further
expansion of the production is in progress so as to synchronize the supply chain in
expanded market. Since the people in developed nations are becoming reluctant to
take food with toxic residues, the demand for bio-fertilizers and bio-pesticides are
increasing phenomenally. They are also planning to export these bio-pesticides to
the countries like Australia. Registration of one of the companys product, Monitor
with the Republic of Kenya and Uganda is almost on completion and ready to export.
Innovative and diversified products, wide range promotional and marketing strategies
have helped the company to reach this stage. With the annual turnover of around 5.5
crore (includes all segments), it stands as one of most successful bio-fertilizer
company in India.

Agriland Biotech Office and Factory

Different Products of Agriland Biotech

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Case four: Shri Dnyaneshwar bio-fert (Bio-fertilizer unit)


Shri Dnyaneshwar Sahakari Sakhar Karkhana Ltd is a cooperative society
established in 1973, in project affected area of Jaikwadi dam Irrigation project,
Ahmednagar District in Maharashtra. It is situated on Newasa-Shevgaon road about
11km away from Ahmednagar-Aurangabad highway. Late Marutrao Ghule Patil was
the founder chairman of the factory. It was registered under Maharashtra
Cooperative Societies Act, 1960 dated 19-10-1970. Due to the availability of dam
water the potentiality has increased for growing sugarcane in this area. Later,
growers of these talukas came together under the leadership of Mr. Patil and
established the factory.

Cooperative profile
The Cooperative society is operating in 92 villages of Newasa and 122 villages of
Shevgaon taluka, making a total of 214 villages within a radius of 60km. Initially, the
society has started with 4243 members and Rs 36.74 lakh of share capital. Today, it
has gone up to 14873 members and Rs. 1061.88 lakh of share capital. Currently, the
annual turnover of the society is to the tune of Rs 170 crore whereas the capital
assets of the society are of around Rs. 150 crore. The society is having very good
reputation in Ahmednagar district as well as in Maharashtra state. It has won several
national and international level awards like, National Productivity Award from
National Productivity Council, New Delhi in 1985-86; National Efficiency Award from
Department of Food, Government of India in 1987-88; Efficiency Award in 1988-89
from National Federation of Cooperative Sugar Factories and Reduced Overall
Recovery Award from Vasantdada Sugar Institute, Pune in 1993-94. They also got
ISO 9002 certificate in the year 2000. The land of this area is either black cotton soil
or very light soils from leveled to undulate. The main source of irrigated is from Mula
right bank canal and Jayakwadi back water. The rainfall of the area is low and
uneven ranging from 15 to 60 mm. The temperature is moderate to high ranging
from 17C to 45C which is congenial for sugarcane.
Sugar factory
The factory got first industrial license to manufacture white crystal sugar and started
its production in the year 1974-75 with 1250 TCD capacity at 6% recovery rate. They

161

have increased the capacity of sugar factory upto 2000 TCD in the year 1981-82 due
to surplus production cane in that area. Later the capacity was further increased to
3000 TCD in 1991-92. In 2001-02, the capacity once was again increased to 5000
TCD. Recently in 2008-09, its capacity has increased to 6000 TCD due to
modernization. Now, the factory is expected to crush around 7000 TCD capacity in
the year 2009-10. Though, they were crushing at 10.70% recovery rate in 2008-09;
they have achieved a peak recovery rate of 12% in the year 2002-03. They paid
more than Rs.1200 per ton to farmers for buying sugarcane during the year 2008-09.
The factory is efficiently using its resources for production of wide range of byproducts. They are distillery, extra neutral and absolute alcohol production, methane
gas production and co-generation of electricity etc.
Cane development activities
The society is encouraging its members with a wide of development activities for
better productivity and quality of the cane. Among various activities, establishment of
vermi-compost and bio-fertilizer units were the major initiatives to preserve the soil
health and sustainability. The other activities are supply of nucleous seed, soil
testing, providing extension services, drip irrigation subsidies and credit facilities.
1. Vermi compost project
A vermi-compost unit with 300 MT per annum capacity is installed by the society.
They are selling the product at a very cheap rate of Rs. 1500 per ton to protect soil
structure and texture. Another compost project from press-mud and spent-wash is
also installed and the product is being sold at Rs.200 per ton.
2. Bio-fertilizer Unit
In January, 2008 the society has decided to set up a bio-fertilizer unit with an aim to
produce quality bio-fertilizers and making it available to their members at a cheaper
rate. They established the bio-fertilizer unit, with an installed capacity of 150 TPA in
the span of six months by spending almost Rs. 80 lakhs under NPOF scheme. They
got Rs. 39.86 lakh as loan from State Bank of India, Shavgaon branch and Rs 10
lakh as the advance subsidy from NABARD. The Joint Monitoring Committee has
visited the unit. They are yet to receive the second installment of the subsidy

162

amount. Currently, the unit is producing 100 tons of bio-fertilizers per annum. The
average capacity utilization of the unit is 66.66 per cent.
Infrastructure and R & D

They installed almost all the necessary equipment in the bio-fertilizer unit. One R & D
laboratory was also attached with bio-fertilizer unit. Equipments like fermentor,
laminar air flow station, autoclave, boiler, air compressor, coolers, vacuum pump,
blending machines, centrifuge, reactor etc were observed in the unit. They have
enough storage space in the godown. Sophisticated weighing and packing machines
were also equipped. The unit is having its own transport vehicles for bringing the
materials as well as for distributing the finished products. They have employed more
than five skilled persons to take care of the plant. The plant is also having technical
collaboration with Agricultural Universities and research stations.

Types of products (Lignite based)


Bio-fertilizers are based on bacteria, fungus and yeast which fixes required nutrient
like nitrogen, phosphorous and potash in the soil. They are producing mainly Lignite
based quality bio-fertilizers with almost 90-95% recovery rate. The average gestation
period per cycle is 8 days and they are doing 4 cycles per month. Even though the
products are not crop specific, but still they are mainly targeting for sugarcane crop.
The bio-fertilizers production was good and meets the quality standards like average
viable cell count 107 per ml and no contamination up to 105 dilutions. The pH is
maintained within the neutral range of 6.5 - 7.5. The average moisture content is 3040%, at par with the standard rates. The table below summarizes their product range
of the unit:
Azotobacter

Azotobacter Chroococcum, Nitrogen fixation bacteria

Asetobacter

Asetobacter sp., Nitrogen fixation bacteria

Azospirilium

Azospirilium sp., Nitrogen fixation bacteria

PSB

Bacillus Coagulans and Torulospora Globossa, Phosphate solubliser bacteria

Rhizobium

Rhizobium sp., a symbiotic Nitrogen fixing bacteria

K Mobilizer

Provides K2O to the plant

D.C. Culture

Bacteria being used for decomposing of organic materials

163

Marketing
The products of bio-fertilizer unit are mainly intended to supply its member
farmers/cane growers. But due to lack of awareness, the demand for these products
is average. So far, the society is selling their products only among its members at Rs
25 per kg. No other form of marketing channel was used. Society is popularizing
these kinds of products in this area mainly to improve the soil quality.
Publicity
The Agri Gut Offices of the society provide information to the sugarcane farmers
regarding seed supply, subsidized schemes, irrigation related schemes, doses of
fertilizers, micro-nutrients, bio-fertilizer, weedicides, horticulture, cane development
schemes through different publications and field demonstrations.
Summary details about Shri Dnyaneshwar bio-fert unit
Sanctioned capacity

150 TPA

Installed capacity created so far

150 TPA

Current production

100 TPA

Capacity utilization rate

66.66 per cent

Financial Bank

State Bank of India, Shavgav branch

Status of JMC

Completed

Status of final subsidy

Pending

Rate of Interest

13.25 per cent

License/FCO

Obtained

Working days per annum

365 days

Recovery rate

90-95 per cent

Gestation period per cycle

8 days (48 cycles per annum)

Raw materials cost

Lignite Rs.7000 per ton

Method of marketing

Only for society members

Rating for market demand

Average

Opinion about the NPOF scheme Good

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Cost and returns from bio-fertilizer unit (Rs lakh per annum)
Item

Amount

Raw material costs

5.98

Culture/inoculant cost

0.10

Media preparation cost

5.60

Water charges

0.24

Labor charges

0.60

Salaries for technical persons

6.00

Packing cost

1.50

Marketing costs

0.00

Power charges

1.00

Transport charges

0.00

Tax and insurance etc

0.20

Repairs and maintenance

0.75

Total costs

21.97

Total production (ton)

100.00^

Gross returns

25.00

Net returns

3.03

Cost of production (Rs/kg)

21.97

Benefit cost ratio

1 : 1.13

^ current capacity utilization @ 66.6 per cent


The above results clearly confirm that the investment in bio-fertilizer unit is highly
profitable. The unit was started earning marginal net profits even at the capacity
utilization rate of 66.6 per cent. The Cooperative society is till now selling at a
marginal profit to only their members. But, they have not yet started the commercial
sales to outsiders of the society. The unit was currently operating at a benefit cost
ratio of 1:1.13.
Suggestions/problems
The managing team of bio-fertilizer unit expressed their problems and suggestions
about the NPOF scheme. The prime suggestion was about the timely release of
subsidy funds. The JMC has visited the unit almost six months back, but still the final
installment of the subsidy is yet to be received. They are also looking for state
government as well as Agricultural university support for marketing of the bio165

fertilizers. The unit was also facing a problem of raw material scarcity i.e., lignite or
talc powder. They also requested the Union government to remove the VAT on the
sales of bio-fertilizers.

The society has a broad and diversified portfolio. Cooperative is very balanced in
use of all their byproducts from sugarcane. They are very good in targeting the
problems of cane growers right from the good seed to end product. The society is
also encouraging the small and weaker farmers through diversified income
generation activities like growing fruit crops, vegetables, sericulture, poly houses etc.
The management of the society has taken several initiatives like compost production,
vermi-compost sales, drip irrigation subsidies and finally supply of bio-fertilizers to
mainly protect and preserve soil and natural resources of that region. But still many
of the society members dont have good awareness about the benefits of these
initiatives. However, the momentum for usage of bio-fertilizers is taking place slowly.
Overall, the society has succeeded in their efforts to increase the productivity
substantially from sugarcane fields which is evidenced from increase in the capacity
of sugar factory from 1250 TCD to 7000 TCD in a span of 35 years.

Cultures stored at the plant

Dnyaneshwar bio-fertilizers in 1kg pack

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Case five: Sree Ganapati Jilha Krishi Audhyogik Sarba Seba Sahakari Society
Ltd Bio-fert cum organic fertilizer (Organic fertilizer unit)
This unit was sanctioned under Corporation Sponsored Scheme by National
Cooperative Development Corporation (NCDC), Fertilizer and Inputs Section, New
Delhi in 2003. NCDC has directed the state Government of Maharashtra to set up a
Bio-fertilizer cum organic fertilizer project with a block cost of 90.0 lakh. But, so far
state Government of Maharashtra has released only 40.5 lakh to the society due to
some reasons. So, the society has established only one part i.e., only organic
fertilizer unit. They bought the site for bio-fertilizer unit and waiting for balance
financial assistance from the State Government.

Society profile
This organization was established by Mr. Chintamanraoji Patwardhan Rajesaheb in
1926. The society is providing restless services to members, farmers, customers,
cooperative societies and common man for last 82 years. The cooperative is situated
at Vasant Market Yard at Sangli in Maharashtra. They have 4435 members and
having savings amount more than Rs. 1.6 crore at the end of 31 st March, 2008. The
society has under taken a broad range of projects. The wide spread activities
includes godowns, organic & bio-fertilizer project, grape wine project, shopping
centre at vasant market yard, sugar factory, cooking gas supply unit etc. They are
planning to start a few new projects namely, grape winery project, sugar factory
connected distillery & co-generation etc. To initiate these projects a huge amount
investment would be required. They are in connection with the following banks in the
region:
a)
b)
c)
d)

State Bank of India, Tasgaon Branch


Sangali District Central Cooperative Bank Ltd, Sangali
Rajarambapu Cooperative Bank Ltd., Peth
Axis Bank, Sangali

Different activities undertaken by society


1. Godown building of 10000 MT capacity: Assistance was obtained from Central
Government through direct funding to built the village godowns. The entire loan
amount was repaid with two years. Through this infrastructure, currently society is
getting more than 30 lakh rent per year.
167

2. Shree Ganpati district Tasgaon Sugar factory unit: The society owns a big
sugar factory. Total sugarcane production in the area is about 3lakh MT in the year
2007-08. The sugar produced was more than 3.7 lakh quintal at a good recovery rate
of 12.31 per cent. More than 90% of the sugar produced was exported. Because of
good quality production they are getting good price for their sugar. Hence, they dont
have any marketing and financial problems. Thus, the society is paying good
dividends to its farmer members.

3. Organic and bio-fertilizer project: Under development scheme of National


Cooperative Development Nigam, this project was started. NCDC, Pune financed
this project under NPOF scheme. By utilizing the first phase amount (Rs.40.5 lakh),
they established the organic fertilizer unit in 2004. Society has created its own
brands Shree Ganpati Chap Sendriya 5:10:5 and 5:10:0. Under the second phase,
the establishment of bio-fertilizer unit is pending. The table below shows production
and total sales details of organic fertilizer unit:

Year
2006-07

Production in
Ton
650

Total sales in
lakh
38.20

2007-08

525

28.07

2008-09

575

30.00

Targeted in 2009-10

1000

75.00

Raw materials and manufacturing


The organic fertilizer unit uses the raw materials like bone meal, leather powder,
potash, micro nutrients etc. Two forms of organic fertilizer mixtures are producing by
mixing the N: P: K in the proportions of 5:10:5 and 5:10:0. They installed a huge
mixture machines for this purpose. Finally, the end product is mixed with micronutrients also.
Unique properties
Very good quality organic fertilizers at very low cost are the recipe of the success.
These fertilizers are useful for most of the crops and especially for Mango, Grapes,

168

Banana and vegetables. These fertilizers release the nutrients slowly and prevent
the nitrate losses in the soil. It also protects the soil texture and micro-organisms.
Major nutrients

Nitrogen (5%), Phosphorus (10%) Potash (5%)

Secondary nutrients

Calcium, Magnesium, Sulphur

Micro nutrients

Zinc, Ferrous, Manganese, Boron

Recommended dosages
Crop
Grape
Orange, Lemon

Chickoo, Guava

Banana
Mango

Pomegranate
Sugarcane
Turmeric, Onion, garlic
Coconut, Cashew

Qty per acre


1000 kg
500 kg
1 kg
2 kg
10 kg
2 kg
8 kg
15 kg
20 kg
1000 kg
5 kg
30 kg
40 kg
750 kg
500 kg
400 kg
1 kg
10 kg

Time of use
October
March
1-2 years
2-5 years
More than 5 years
Upto 2 years
Upto 4 years
Upto 7 years
After 7 years
While planting
After 2 years
After 8 years
After 13 years
8 days before plucking
During land preparation
During land preparation
During land preparation
After 4 years

Marketing
The society is using both direct and indirect methods of marketing. Under the direct
marketing channel, around 60 per cent of the total production gets marketed. The
remaining 40 percent of the output is being market through dealers. Overall, the
market demand is good for organic fertilizers. Brand value, image of the society,
good quality of fertilizer and cheaper price are the strong forces pushing the product
well in the market. The society is also marketing their products in Konkan region,
Nashik region and rest of West Maharashtra region.

169

Summary details about organic-fertilizer unit


Sanctioned capacity

3000 MT per annum

Installed capacity created so far

3000 MT per annum

Current production

600 MT per annum

Capacity utilization rate

20.0 per cent

Financial Bank

NCDC, Pune Regional centre

Status of JMC

Under the supervision of NCDC

Status of final subsidy

Obtained

Rate of Interest

8.5 per cent

License/FCO

Obtained

Working days per annum

240 days

Recovery rate

98 per cent

Gestation period per cycle

Not applicable

Raw materials cost

Rs.8000 per ton (bone meal)

Method of marketing

Direct and indirect method

Rating for market demand

Good

Opinion about the NPOF scheme Good

Machinery producing the fertilizer

Finished product, ready for packing

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Cost and returns from Organic-fertilizer unit (Rs lakh per annum)
Item

Amount

Raw material costs

42.00

Culture/inoculant cost

0.00

Media preparation cost

0.00

Water charges

0.00

Labor charges

0.72

Salaries for technical persons

0.00

Packing cost

2.40

Marketing costs

0.12

Power charges

0.15

Transport charges

0.00

Tax and insurance etc

0.10

Repairs and maintenance

0.08

Total costs

45.57

Total production (ton)

600^

Gross returns

48.00

Net returns

2.43

Cost of production (Rs/kg)

7.60

Benefit cost ratio

1 : 1.05

^ current capacity utilization @ 20.0 per cent


The results clear indicate the profitability of investment in organic-fertilizer units in
Maharashtra. The current capacity utilization of the unit was low at 20.0 per cent due
to lack of demand. With increase in the capacity utilization, the unit would get more
profits in the years to come.
Problems/suggestions
The management team of the society highlighted the problems in operating the unit.
They are facing long delay in financial approvals from NCDC as well as from State
Government of Maharashtra. Marketing the organic fertilizer is another major
problem. Due to low awareness of the farmers, they are trying hard to convince
them. Slowly, the sugarcane and orchard growers are realizing the importance of
organic fertilizers. They are also facing difficulty in getting sufficient quantity of raw

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materials for the unit. Labor availability and power shortages also hindering the
production process. Because of all these setbacks, the unit is operating at very low
capacity utilization rate. Finally, the society is eagerly waiting for the phase-II
financial assistance for establishing a bio-fertilizer unit.

By diversifying their portfolios in different ventures, the society is trying to grow


further. The society is having good number of fixed capital assets like godowns,
shopping complex and gas agency etc. The organic fertilizer they are producing is
unique in its character and nutrients prepared based on commonly available raw
materials. Due to their high quality and low cost, they are able to convincing the
farmers in this region. Further financial assistance from NCDC and state government
may raise their profits phenomenally.

Case six: Antecedent Pabulum Inc (Bio-fertilizer unit)


It is a lone bio-fertilizer unit sanctioned under NPOF scheme by NABARD in Punjab
state. The main aim of the unit is reducing the technological gap between research
laboratories and farmers fields. Dr.Prem Narayan Singh, partner of the business
opined that the actual research in the field of bio-technology is not reaching to the
area of bio-fertilizers. If transfer of these technologies could have happened, it would
further reduce the cost of bio-fertilizer further.

Company Profile
Antecedent Pabulum Inc. (API) was incorporated as a biotech company in the year
2006 in Bathinda district, Punjab. Company is showing a repaid growth in the area of
technology development and commercialization of a wide range of agri-bio-inputs for
plant nutrition and plant protection. It is also engaged in the production of feed
additives for live stocks and poultry birds by using appropriate bio-techniques.
Company specializes in the development and manufacture of liquid and carrier
based bio-fertilizers and bio-pesticides. The unit is having very high colony forming
species for fertigation and soil application. It seems obvious that a healthy plant is
more able to withstand the effect of pests and diseases. But at API, this concept has
been taken further with the development of a range of products designed to

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maximize the health and vigor of crops and thereby to increase their ability to
withstand with pests and diseases.
Infrastructure and growth plans
The company has all required facilities for bio-fertilizers production. They have four
fermentor (own manufactured), laminar air flow station, autoclave, boilers, air
compressor etc. The unit is having enough storage and packing space. The
company is also having a four wheeler and generator facilities. They have their own
R & D lab with sufficient number of technical personnel. They have good technical
collaborations with premier institutions like PAU, NCOF, BHU, IARI etc. The
company has growth plans to replicate the technology by setting of micro-units at
village level in association with different agricultural co-operative societies/farmers
clubs in order to increase their availability at economical rates. The company is also
planning to produce cyno-bacteria cultures especially for enhancing the yields in
paddy crop. The team is also working on the production of Spirolina, which is a rich
source of protein as well as anti-oxidant for poultry.
Types of products (Talc based)
1. Bio-fertilizers
Nitrofix

Azotobactor sp., a free living soil inhibiting nitrogen fixing bacteria

Native

Phosphate solubilizing bacteria

Garrison

Azospirillium sp. an associative nitrogen fixing bacteria

Oedema

Rhizobium sp., a symbiotic nitrogen fixing bacteria

2. Bio-pesticides: These are the products based on bacteria, fungus, viruses and
botanical extracts which kill the target insects, pests, disease casual organisms
on a very efficient manner without any disturbance of ecological balance.
Tricoguard

A 1.0% W.P. formulation of Trichoderma viride and is used for the


management Sclerotonia, Phytophthora, Pythium, Rhizoctonia, Fusarium,
Sclerotium etc.

Geoguard

A 0.5% W.P. formulation of Pseudomonas fluorescence and is used for the


management of bacterial leaf blight of paddy, sheath blight of paddy, root
and foot rot of vegetables etc.

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Summary details about API unit


Sanctioned capacity

250 TPA

Installed capacity created so far

250 TPA

Current production

500 TPA

Capacity utilization rate

200 per cent

Financial Bank

Bank of Baroda, Bathinda branch

Status of JMC

Completed

Status of final subsidy

Obtained

Rate of Interest

11.00 per cent

License/FCO

Obtained

Working days per annum

300 days

Recovery rate

90 per cent

Gestation period per cycle

3-5 days (50 cycles per annum)

Raw materials cost

Rs.5000 per ton (Talc)

Method of marketing

Indirect

Rating for market demand

Very good

Opinion about the NPOF scheme Good

Fermentor

Bio-fertilizers in drams, ready for sale

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Cost and returns from bio-fertilizer unit (Rs lakh per annum)
Item

Amount

Raw material costs

18.00

Culture/inoculant cost

1.00

Media preparation cost

4.59

Water charges

0.50

Labor charges

6.00

Salaries for technical persons

13.00

Packing cost

60.00

Transport and marketing costs

60.00

Power charges

3.60

Tax and insurance etc

0.05

Repairs and maintenance

12.00

Working capital

12.00

Total costs

190.74

Total production (ton)

500.00^

Gross returns

300.00

Net returns

109.26

Cost of production (Rs/kg)

38.14

Benefit cost ratio

1:1.57

^ current capacity utilization @ 200.0 per cent


The above results show the high profitability of bio-fertilizer production in Bathinda,
Punjab. The cost of production of bio-fertilizer per kg was Rs.38.14. The unit is
earning a net profit of Rs.109.26 lakh per annum. The benefit cost ratio of the unit
was 1: 1.57.

Marketing
The API is marketing its 98 per cent production through indirect marketing. They
have very strong network of dealers all over the state of Punjab. Nearly half of their
cost of production is incurring towards marketing of the products. Their products are
always timely available in the market. The company experiences its peak demand
during the period of July Sept in a cropping year. Overall, they are not facing any
marketing problems. It is also proved by high capacity utilization of the unit.

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Problems/suggestions
Mr.Prem Narayana has expressed few problems in production of the bio-fertilizers.
They are: difficulties in the preservation of liquid Rhizobium culture in the bottles.
The bottles are bursting due to the gas formation from the culture. They are also
facing the difficulties in PH matching. The company is packing the cultures at 20 per
cent moisture level against the recommendation of 30-40 per cent. This is due to
avoid the contamination problems in the cultures.
The broad vision of the company is to improves the texture and porosity of the soil
and maintain its PH. Safeguard the eco-system by using beneficial micro-organisms
which are supplemental to chemical fertilizers and pesticides. The usage of biofertilizers not only minimizes the chance of soil, water and air pollution caused by the
excess use of chemicals but also reduces the subsidy burden of the government.
The effective usage of these products reduces the cost of cultivation and increases
the productivity of crops by 15-20 per cent. Ultimately, they are helping in improving
the incomes and employment of the farmers in Punjab. Finally, the company has
succeeded in achieving their goals.

Case seven: Vitthal Rukhmini Gandul Khat Prakalp (Vermi-hatchery unit)


Mr. Sahebrao Ganpat Bhand, promoter of Vitthal Rukhmini Gandul Khat Prakalp, is
the only son of his father Ganpat Kachru Bhand holding 2.4 ha of ancestral land in
the village Dadh Khurd, Sangamner taluka, Ahmednagar district in Maharashtra. He
cultivates his land under the command area of left bank Pravara canal of
Bhandardara dam. He studied upto 11th standard before taking up farming as his
primary occupation at the age of 18 years.

He later came in contact with Krishi Vigyan Kendra (KVK), Babhaleshwar district
Ahmednagar located 13 k.m from his home. The scientists of the KVK convinced him
in the improved methods of farming by participating in the front line demonstration
program on Bengal gram. His yields in that year improved from the existing 4 to 9.5
quintals from 0.40 ha area. The KVK further helped him to establish a Kranti farmers
club in 1999 in his native village bringing into the mainstream other village youth and
farmers to participate in new and improved farming. Later he along with other

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members of the farmers clubs was given support for establishing a small scale
vermi-compost unit yielding compost for his crops. He initially utilized vermi-compost
for lime crops that helped him improved yield and quality of fruits. He also secured
higher yield of 80 quintals per acre per annum from the existing 60 quintals. He was
convinced with use of this environment friendly vermi-compost which helped him in
improving yield and productivity. He later started promoting the concept of organic
farming and actively participated in organic farming programs of KVK.
As the awareness of farmers on use and benefits of vermi-compost grew, it became
apparent that the demand for vermi-compost would increase and there would be no
suppliers who could match the demand for vermi-compost from farmers. Thus, he
thought of establishing a permanent structure of vermi-compost unit of size 30ft X 30
ft with production capacity of 5 tons. He utilized a part of this vermi-compost
production for his crops and the remaining sold to other farmers successfully. As the
demand for vermi-compost grew he undertook the benefit of various Govt schemes
for starting a vermin-culture hatchery for distributing earthworms to other farmers
and youths. He established a very innovative hatchery from the spent-slurry of
biogas plant. The results were encouraging and he made an improvised
arrangement for rearing and multiplying vermin-culture hatchery. This helped him to
sell and distribute 100 to 150 kg vermin-culture per year. Further he expanded the
vermi-compost unit to a size of 7320 sq.ft area investing Rs 9.50 lakhs with support
of Rs 4.0 lakhs as bank loan from Ahmednagar District Central Coop Bank,
Chanegaon and 1.5 lakhs subsidy from government under NPOF scheme with
annual production capacity of 400 MT of vermi-compost.
The unit was duly registered as small scale industry under District Industries Centre.
Further, he also obtained manufacturing license and sale license for vermi-compost
unit from the Department of Agriculture. He has plans to export the vermi-compost
for which he legally obtained Import Export code from Joint Directorate of Foreign
Trade, Pune. The production of vermi-compost, vermiculture and vermi wash has
been supplied to 3000 farmers for enhancing their production capacity several times.
The unit employs 9 labours with 2 males and 7 females round the year from his
village. There are 7 other labours who seek secondary employment from supply of
vermi-compost and other products.

177

Summary details about vermi-hatchery unit (dung based)


Sanctioned capacity

150 TPA

Installed capacity created so far

400 TPA

Current production

400 TPA

Capacity utilization rate

100 per cent

Financial Bank

ADCC Bank Ltd, Ahmednagar

Status of JMC

Completed

Status of final subsidy

Obtained

Rate of Interest

12.5 per cent

License/FCO

Obtained

Working days per annum

365 days

Recovery rate

70 per cent

Gestation period per cycle

50 days (7 cycles per annum)

Raw materials cost

Rs.500 per ton (cow dung)

Method of marketing

Direct method

Rating for market demand

Very good

Opinion about the NPOF scheme Excellent

Part of Mr.Bhand vermin-compost unit

Mr. Bhand explaining the production process to


IIMA study team

178

Cost and returns from vermi-compost production unit (Rs per annum)
Item

Amount

Raw material costs

325000

Cost of worms

25000

Labor costs

100000

Water costs

50000

Packaging costs

150000

Marketing and transport costs

50000

Rents, taxes, insurance if any

5000

Repairs and maintenance

75000

Interest on working capital #

93600

Total costs

873600

Compost production (Qtl)

4000

Returns from
a. Compost sales

1600000

b. Worms sales

100000

Total returns

1700000

Net returns

826400

COP of vermi-compost (per qtl)

218.4

# @ 12 per cent per annum


The above results have proved that he is one of the efficient producers of vermicompost not only in Maharashtra state but in India as well. The cost of production of
vermi-compost was Rs.218.4 per qtl. This value was much lesser when compared
with all three remaining states. The unit was earning a net profit of Rs.8.26 lakh per
annum. The unit was earning almost double the income than the costs incurred to it.

Marketing
He is marketing his entire production through direct sales. He is not only selling his
products in Ahmednagar district but also in the surrounding districts and states.
Mr.Bhand has also obtained all necessary certificates required for export to other
countries. His good reputation as well as maintenance of quality is helping him well

179

in the marketing of the product. He also opined that the delayed payments by
farmers and less demand during summer are some of the bottlenecks in marketing.
Suggestions
Mr.Bhand made few suggestions for effective implementation of the scheme. He felt
that the advance and final subsidies should be released timely and JMC visits should
be completed quickly. He stressed that the government departments and local
universities should support or help the promoters in marketing of their vermicompost. He also expressed that the current subsidy amount of Rs.1.5 lakh should
be enhanced further due to escalations in the costs of establishment.
Mr.Bhand is a classic example for successful entrepreneurs in the field of vermicompost production in India. With in a span of a decade, he has proved himself as a
role model in this area. His dynamic personality coupled with quick adoptive nature
has helped him to reach pinnacles of life. By proper blending of modern techniques
with his innovative ideas, he has succeeded both in crop production as well as
vermi-compost production.

Case eight: Warana cooperative society (private vermi-hatchery unit)


Warananagar is a small town, situated at the foothills of Panhala-Jyotiba hill ranges
in Kolhapur district of Maharashtra state. Warana cooperative society is an ideal
example of integrated rural development. The region has transformed from a barren
tract of land to an epitome of cooperative movement in last few decades. Late
Tatyasaheb Kore, the architect of the dream, aspired of creating a New Man Nava
Manus. Today, the cooperative society has links with 25 cooperative societies and
having a turnover more than Rs.600 crore. The sugar factory and people of the
cooperative keep the belief in empowering and raising awareness of the farmers.
The major activities of the society are:
1. Warana cooperative sugar factory
Warna is traditionally known for the sugar cane cultivation and conversion of sugar
cane to Jaggery and selling it in to the nearby developed market of Kolhapur. Price
of Jaggery fluctuate but not the price of sugar was the basis behind establishing this
factory. Right from the very first year, it touched horizons of success by producing

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more than 8 lakh bags of sugar at 12.72% recovery rate. Tatyasaheb Kore Warna
co-operative sugar factory has got Union Commerce and Industry Ministry's ''Star
export house grade'' accreditation. Warna sugar factory is the first in the country to
earn such an honor. The factory exported sugar about 12 lakh and 11 lakh quintal in
the current and previous years respectively. Tatyasaheb Kore Sakhar Karkhana Ltd
at Warna nagar has 69 villages in the area of operation with 10,800 ha of land under
sugar cane production in the year 2009-2010. Today, the capacity of the factory is
9000 TCD with almost 13% recovery rate. In almost all years since 1982-83, actual
price paid is higher than SMP and in the last two years, it is more than double.
Various cane development schemes are implemented by the sugar cane factory to
increase the productivity of sugar cane with usage of minimum inputs. They are
providing inputs like chemical fertilizers, pesticides, herbicides etc on subsidized
prices on credit to benefit cane growers.
2. Bio-fertilizers unit
Sugar cooperative society has bio-fertilizer laboratory which produces bio-fertilizers
like Acetobactor, Azotobactor, PSB culture, Decomposing culture, Tricoderma, EM
solution etc. Bio-fertilizers are important for protecting soil health as sugar cane is
high nutrients exhausting crop. The usage of bio-fertilizers helps in biological
nitrogen fixation, mobilization of phosphorus and sulpher etc. The society is
providing at 15% subsidy to promote its usage by farmers.
3. Vermi compost (press mud based)
The unit is not financed by NABARAD or covered under NPOF scheme. It is a
private unit owned by Warana society. The unit was established by the sugar factory
by investing about Rs.20 lakh for producing almost 1200 MT per year. They started
the establishment of unit in 2003. But, it started functioning from January, 2004 at
the capacity of 550 TPA. Mr. Chetan Gore, who is the architect and current
supervisor of this project, is a well educated person having good experience in
producing vermi compost from the wastes of sugar factory.

Infrastructure and raw materials


The unit has 46 steel framed beds each with a capacity of 2 MT compost productions
in every 45 days. The rate of recovery was 25-30 per cent. These beds are placed in
open place but they have a shed for keeping the finished product. The unit has all
181

necessary facilities like raw material availability, seed stock, water supply, store
room, transport vehicles and packing machinery. The raw materials using in the
production are press mud, cow dung, sugar cane leaves etc. The unit is running with
most updated technology. The worms are very healthy and long. Worms are
maturing in 6-8 weeks and the multiplication rate is more than 3 times in six weeks.
They run the unit for 10 months in a year because difficulties of vermi-compost
production during the rainy season. During the slack season, they are preserving the
seed stock. Seven fixed labor are working in the unit including three women.

Manufacturing process
The raw materials that are using in the unit are mainly coming from the sugar factory.
They purchase the press mud at the rate of Rs. 100 per MT if it is wet and Rs. 200
per MT if it is dry. The cow dung is available at Rs. 400 per MT whereas sugarcane
waste is available at Rs. 50 per MT. The collected inputs are kept at a place for 15
days and then mixed thoroughly. They also add some bacterial cultures for quick
decomposition. The steel frames are filled with mixed materials along with worms for
producing compost. On an average, each production cycle takes 45 days for final
compost production. Later, they sieve the compost and packed it 50 kg bags.

Marketing
The unit is producing good quality vermi compost and selling it under the brand
name of Warana. Nearly 90 per cent of their production is sold back to the sugar
factory, who buys it at Rs 1800 per MT. In turn, the sugar factory is selling the
compost to its society members to improve their soil quality and fertility at Rs 2500
per MT, which is comparatively cheaper than the market price. The unit also do
direct marketing to farmers/non-members of society. But, only 10 per cent of their
total production is marketed through this way.

182

Summary details about vermi-compost unit


Installed capacity

1200 TPA

Current production

552 TPA

Capacity utilization rate

46 per cent

Financial Bank

Established by Warana Society

Status of JMC

Not applicable

Status of final subsidy

Not applicable

Rate of Interest

Not applicable

License/FCO

Obtained

Working days per annum

240 days

Recovery rate

25 per cent

Gestation period per cycle

45 days (6 cycles per annum)

Raw materials cost

Rs.100 per ton of wet press mud

Cost of production per kg

Rs.1.80

Method of marketing

Through society and direct

Rating for market demand

Very good

Opinion about the NPOF scheme Not applicable

Steel framed vermi compost bed

Packed compost, ready for sales

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Cost and returns from vermi-compost production unit (Rs per annum)
Item

Amount

Raw material costs

3.56

Cost of worms

1.84

Labor costs

2.70

Water costs

0.50

Packaging costs

1.32

Marketing and transport costs

0.00

Rents, taxes, insurance if any

0.10

Repairs and maintenance

0.50

Interest on working capital #

1.20

Total costs

11.72

Compost production (Qtl)

5500

Returns from
a. Compost sales

13.80

b. Worms sales

2.50

Total returns

16.30

Net returns

4.58

COP of vermi-compost (per qtl)

213.0

# @ 12 per cent per annum


The results clearly lend support for production of vermi-compost from press mud in
Maharashtra. The unit costs of production are more or less equal from press mud as
well as dung based vermi-compost units. The unit gained a net profit of Rs.4.58 lakh
per annum. The profits of the unit would increase further with increase in capacity
utilization and efficiency.

Problems/suggestions
Shortage in power supply and absence of favorable atmosphere during rainy season
for vermi-compost production are the major setbacks for the unit. Mr.Gore opined
that the demand for organic manures can be further improved by conducting more
awareness programs and field demonstrations. He also said that their unit is looking
for financial support for further expansion in production. He expressed that integrated

184

usage of organic and inorganic fertilizers will increase the productivity of sugarcane
without damaging the soil, eco-system and natural resources.

High quality and low cost production of vermi-compost by using press mud are the
major reasons for high demand. Moreover, they are marketing in the trade mark of
Warana through warana bazaars giving more impetus for easy marketing. Growing
awareness of farmers about soil health and sustainable production techniques is
further boosting the use of organic fertilizers in this region. However, to generate
more profits in the production of compost, the unit has to increase its current
capacity utilization and scales of production. Since availability of raw materials is not
a constraint in the production, the society should think about some high end
technology for massive production of compost in this region.

4. Warana cooperative Dudh Sangh


Warana dairy is one of the most successful cooperative dairy in India. Established in
1968, it was initially operating in around 66 villages and sending the milk to Miraj.
Later in 1974-75 they established their own dairy and milk processing unit and
started marketing milk, butter and ghee to Mumbai. They have now set their own
cold storage and processing unit at Navi Mumbai as well. The dairy is an ISO 90012000 organization and its ghee got quality of AGMARK. Their annual turnover is
now as high as Rs. 460 crores. The processing units capacity is about 10 lakh liters
per day.

5. Warana cooperative bank


Warana cooperative bank, a big bank of small people, was established in 1966. So
far, it has got 24 well equipped and computerized branches with Rs. 140 crore fixed
deposit, Rs. 85 crore loan disbursements and Rs. 2.8 crore as a share capital.

6. Warana Bazaar
This is the first cooperative departmental store in India. This was established in
1976, with 50 branches, 2 departmental stores and 6 franchises units. Today, the

185

turnover is more than Rs 90 crore. About 78 per cent shareholders of the Warana
Bazaar are women. It caters all kinds of needs of rural customers.

Like this, they are infinity number of activities under one roof called Warana.
Tatyasaheb Kore was a Great visionary leader with an in depth understanding of
poor economic status of farmers in this region. Initially, he started with establishment
of sugar cooperative and formed strong market linkages for cane growers. Later, he
has given equal weightage for the developed of agri-allied cooperative such as milk
cooperative and poultry farms. To improve the socio-economic status and savings of
the farmers, he has formulated Warana cooperative bank. He has also given more
emphasis on sectors like education, health, women empowerment etc. All these
initiative paved the way for integrated development of the society and welfare of the
poor.

****************

186

Chapter VI
Marketing of organic inputs in India
Input marketing is growing at a rapid rate in India. Besides rational output/input
pricing, there is an urgent need to effectively meet the increasing and changing
requirement of various inputs in agriculture. In the recent past, the use of agricultural
inputs has not only increased but certain structural changes in use of different inputs
have also been noticed (Chauhan, 1992). It is felt that the increasing reliance of
farmers on purchased inputs makes him vulnerable to breakdown in delivery of such
inputs and their supply restriction or fluctuations in their cost. In this context
management of agricultural input supply chains assumes greater importance. So,
effective distribution and management of marketing channel hold the key to
commercial success in any industry, but much more so in the agricultural input
industry (Bhargava, 1992).

Major thrust in the policy areas is to be laid on the problems of marketing and finding
solution to such problems through relevant marketing facilities. If the marketing
activity is developed, demand for goods increases, as a result, production of goods
also increases. Due to increased production, the demand for inputs increases i.e.,
the demand for input is derived from the increase in demand for the output. If the
supply of these inputs is ensured with competitive prices, quality and time, without
any risk involved, the needs and desires of farmer will satisfy. This is possible only
when the markets are efficient in supplying the needed inputs to the farmers. Hence,
efficient marketing system would always brings welfare to all those involved in the
system (Acharya and Agarwal, 2008). So creation of an efficient marketing system
for marketing of organic inputs is the need of the hour for strengthening the organic
farming in the country (Singh, 2004; Ghosh, 2004). Thus, this chapter briefly covers
the major channels used by promoters for marketing of their organic inputs in the
study area, problems in procurement and usage of different organic inputs and
issues in marketing of organic inputs.
Ghosh (2004) studied the promotion of bio-fertilizers market in India and concluded
that there has been no accelerated growth in distribution as well as inadequate
spatial diffusion across states. The study also highlighted that about 90 per cent of

its usage restricted to Western and Southern regions. Finally, the paper argued that
the government has ample grounds to intervene to set up an effective market for biofertilizers, while encouraging private players. But the policy and instruments of
intervention need to be designed with care. For greater farm level acceptance of
organic inputs, the study gave various suggestions to the Government.

6.1 Channels for marketing of organic inputs


This section specifically emphasizing about the different marketing channels exists in
sample vermi-compost units covered in the study. More or less, the situation is same
in the rest of India. Almost all units were following direct sales method rather than
depending upon any other intermediary. In very few cases, units were linked up with
local dealers and sales representatives. But, the share in total sales was very high in
direct sales (almost 60-80 per cent). In general, the sample units are using the
following three basic channels for marketing of organic input i.e., vermi-compost.

Channel 1:
Producer

Organic farmer

Channel 2:
Producer

Local Dealer/Distributor

Organic farmer

Channel 3:
Producer

Dealer/Distributor at distant market

Organic farmer

Channel-1 represents the direct marketing of vermi-compost producers to organic


farmers, green houses, nurseries and orchards etc. This was major marketing
channel among the three different types. This channel was exists in all the four
sample states. It accounted for lion share (70%) in the total product marketed. This
way of marketing is taking place basically by his local contacts with different people
and his network in neighboring villages. Faith or trust on the vermi-compost producer
plays a crucial role in this channel. But, the main problem in this channel was sales

188

on credit basis. The producer has to rely on the organic farmer/nursery person for his
payment till he markets his product. So, producer has to investment first and waits
for his returns. Sometimes, the waiting period varies from 4 to 12 months. Since
many of the producers belong to medium and large land holding categories, they can
sustain to some extent of time delay. However, it is burdening the producers when
marketing it directly. Most of the product marketed through this channel was nonlicensed/certified.

Channel-2 depicted that an entry of one middleman in the direct marketing between
organic input producer and organic farmer. These local dealers/distributors are
basically involved in regular marketing of fertilizers/pesticides in the villages. They
were asking the vermi-compost producers to fill the final product in their bags which
contains dealers trade name or mark on it. Later, the dealer sells the product on his
own trade mark or name to organic farmers in different villages. The maximum
coverage by a dealer/distributor will be around 10-15 villages or one taluka. Here,
the influence of dealer/distributor plays a major role in marketing of the compost. But,
local dealers/distributors were paying very low price to vermi-compost producers.
However, the sales in this channel are also on credit basis. Overall, the producer to
some extent will reduce his marketing risk by loosing some margin in sales. The
quantum of total product marketed through this channel was around 20 per cent. The
type of product marketed through channel was also mostly non-certified. This
channel was operating in Gujarat, Maharashtra and U.P states.

The slight difference between Channel-2 and Channel-3 was the location of the
dealer/distributor. In case of Channel-3, the dealer/distributor operates the marketing
transactions from distant place. The vermi-compost producer will export his product
to the distant dealer/distributor where they have good demand/market. The
distributor/dealer in that place helps in marketing the product there. Here, the
producer has good chances to reap premium prices for his product provided the
quality is high. Normally, the quantity of product marketed through this channel was
very low (10 per cent). This mode of marketing was prevalent in U.P than in the
remaining states. The reason was the proximity to nations capital and export
channels making it more advantageous for U.P state. However, the problem in this

189

channel was certification of the product. Some private labs and brokers taking this as
advantages and getting 5 to10 per cent share in the total returns.

Nature of market demand


The nature of market demand in the vicinity of organic input units in the sample
states were asked during the field visits. The summary of answers is presented in
table 6.1. The sample organic units were classified in to three categories based on
the existing market demand for organic inputs in the surrounding villages. Overall,
32.5 per cent of units rated it poor demand for vermi-compost in their villages. Half of
the study units classified the markets as average. Only 17.5 per cent of promoters
expressed it as good demand for their vermi-compost in the villages. In case of
Gujarat, nearly half of the sample units categorized under poor demand while
remaining half as average. All the promoters in Punjab expressed that the market
demand as average. Out of the four units in Maharashtra, two each were classified
under average and good demand markets. The total sample units in U.P were
labeled in to seven, five and five respectively for poor, average and good market
demand.
Table 6.1 Classification of input units based on market demand (no.)
Quarter

Gujarat Maharashtra

Punjab

Uttar Pradesh

Overall

Poor

13 (32.5)

Average

20 (50.0)

Good

7 (17.5)

Total
13
4
6
17
Note: Figures in the parenthesis indicates percentage to total

40 (100.0)

Intensity of market demand


The distribution of market demand across different quarters in a year is presented in
table 6.2. The market demand in sample states were rated across four quarters in a
year. It clearly indicates that there is no uniformity in market demand across states.
These differences were even conspicuous within region. It concludes that the market
demand depends upon a wide range of factors i.e., choice of crop, soil nature, crop
management practices etc.

190

Table 6.2 Market demand over four quarters (ranks)


Quarter
First quarter
(Jan-Mar)
Second quarter
(Apr-Jun)
Third quarter
(July-Sept)
Fourth quarter
(Oct-Dec)

Gujarat

Maharashtra

Punjab

Uttar Pradesh

The peak demand for vermi-compost in Gujarat was observed in second quarter of
the year. The farmers in Gujarat might be more interested to apply vermi-compost
during land preparation period (before kharif season). The highest market demand in
Maharashtra was noticed during third quarter of the year. The farmers in
Maharashtra also showed interest in application of vermi-compost just before taking
up the kharif crops. In case of Punjab, Jan-March was listed as a top priority. This
may be due to more usage during winter Wheat crop. Similarly, for U.P, fourth
quarter as the choice for maximum consumption. The start of ratoon crop of
sugarcane or wheat crop may be reason for higher demand.
6.2 Problems in procurement and usage of organic inputs
To elicit the information about the problems in procurement and usage of organic
inputs, about 15 organic farmers per state (a total of 60 farmers) were interviewed
during field visits. The detailed information on awareness, purchase source, timely
availability and quality of organic inputs were collected through structured
questionnaire. The major four inputs like seeds, vermi-compost, bio-fertilizer and biopesticides were covered in the study. The input-wise details were summarized and
presented in tables from 6.3 to 6.5.

Seeds
Most of organic farmers are growing desi or local varieties of crop seeds. Initially,
they borrow from fellow organic farmers or NGOs in their region. Later, they preserve
their own seeds for future needs. Nearly 70 per cent of the sample farmers are selfreliant on seeds. In case of Gujarat (25 per cent), all sample cotton organic farmers
in Kutch district are getting seeds from Agrocel Industries Ltd every year. The
191

remaining 5 per cent sample farmers buy from market or state agricultural
department. Around 88 per cent of the total sample farmers expressed that they
dont have any problem in getting seeds timely. Only 12 per cent of sample farmers
said they are facing problems in timely availability of seeds. 54 out of 60 sample
farmers are satisfied with the quality of seeds available. Approximately 10 per cent
sample organic farmers are not happy with the quality of seeds. In many cases, the
costs of organic seeds (desi) were lower when compared with hybrid seeds of the
same crop. Overall, the sample organic farmers did not express any specific problem
in procuring the seeds across the four study regions.

Vermi-compost
The summary of responses of sample organic farmers across different states on
procurement of vermi-compost is presented in table 6.3. Almost all the sample
farmers have the awareness about vermi-compost. But, many of them are not
exclusively using vermi-compost to supplement the inorganic-fertilizers. They are
applying it in different forms like Farm-Yard Manure (FYM), NADEP compost, biodynamic compost and Amruthpani, Jeevamruthpani etc (liquid manures). The major
problems perceived in the study in vermi-composting are care about worms and
hidden costs in its maintenance.

In case of Gujarat, usage of vermi-compost was very low (around 10%) in organic
crops. Mostly farmers in Kutch district practicing NADEP compost method. Partly,
they are also using neem and castor cakes provided by Agrocel Industries Ltd at
subsidized prices. Nearly 87 per cent of farmers expressed that the compost is
available timely. All most all the cotton growers rated quality of inputs as good.
Table 6.3 Details about procurement of vermi-compost
State

Awareness
(yes-%)
100

Purchase source

Timely available
(yes-%)
87

Quality

67

Average

Maharashtra

100

Own, Agrocel store


and market
Own, market

Punjab

100

Own, market

93

Good

U.P

100

Own, market

67

Average

Gujarat

192

Good

Most of sample farmers in Maharashtra are using bio-dynamic compost, Amruthpani


and Jeevaruthpani etc (liquid manures). Very few farmers are also practicing vermicompost for organic cultivation of sugarcane. Nearly, 85 per cent of their compost
requirements met by own production. 10 out of 15 farmers said that the compost is
available timely in the market. But, they graded the quality as average. All the
sample organic farmers in Punjab followed either natural farming (Amruthpani,
Jeevaruthpani etc) or NADEP compost. Most of their compost production
requirements are met by themselves only. The timely availability and quality of the
compost is good. In case of U.P, vermi-compost, NADEP compost, Amruthpani and
Jeevaruthpani are major forms of application. Here, there is a demand for vermicompost and farmers are buying it from market as well. The timely availability and
quality of it was low. Overall, the specific problems in procurement of vermi-compost
are lack of organized marketing channels in the study regions. Absence of product
standards and certification of compost are major hurdles. Most of the sales are
based on personal faith or trust of the producer.

Bio-fertilizers

The details about procurement of bio-fertilizers in sample states are presented in


table 6.4. On average, 60-80 per cent of organic sample farmers have good
awareness about bio-fertilizers and their usage. The major sources for procurement
are state agricultural universities and agricultural departments. Absence of organized
input marketing channels is the major constraint for timely availability and quality. 87
per cent of the sample farmers in Gujarat have awareness about bio-fertilizers. They
all purchase from Agrocel stores in the study region. They told that the quality of
input is good. Similarly, in case of Maharashtra only 67 organic farmers are aware of
it. State agricultural university is the major source for them. They expressed that the
quality of bio-fertilizers are effective.

The average awareness rates are almost equal (60 per cent) in case of Punjab and
U.P states. The major sources are state agricultural universities, National
Horticultural Mission (NHM) and agricultural department. In general, they dont have
any problem in getting them timely. But during the peak periods, scarcity occurs

193

because of absence of established input marketing channels. Sometimes, they are


facing the problem of old stocks of bio-fertilizers. Normally, six months after packing
of bio-fertilizers, the effectiveness will go down. They perceive that the performance
of bio-fertilizers is average. The specific problem for procurement is lack of effective
distribution channels at block levels. Product standardization is very poor and there
are no checks for adulteration.

Table 6.4 Details about procurement of bio-fertilizers


State

Awareness
(yes - %)
87

Purchase source

Quality

Agrocel store

Timely available
(yes-%)
87

Maharashtra

67

Agril. Univ

80

Good

Punjab

60

PAU, NHM, Agril-Dept

74

Average

U.P

60

Univ, Agril-Dept,
Private company

87

Average

Gujarat

Good

Bio-pesticides

The procurement information about bio-pesticides among organic farmers is


presented in table 6.5. On whole, 70 per cent farmers have awareness about biopesticides. But, most of them mainly aware of neem oil, bramhastra and agniastra
etc (natural pesticides). Almost all the farmers prepare these pesticides by
themselves and apply. But, use of bio-pesticides like Trichoderma viride,
Pseudomonas, Beauvaria, Verticillium and Bacillus are limited. Very few farmers in
the sample have exposure about them. In case of Gujarat, organic cotton farmers
are dependent on Agrocel for neem oil. Presence of some private companies who
produces bio-pesticides and natural plant growth regulators was observed in case of
Punjab and U.P states. But, very few farmers are using them or under process of
trials. Overall, the organic farmers are happy about the results of bio-pesticides.
There are no specific problems in procurement of bio-pesticides in the study area.

194

Table 6.5 Details about procurement of bio-pesticides


State

Awareness
(yes - %)
87

Quality

Own, Agrocel store

Timely available
(yes-%)
87

Maharashtra

80

Own, private

100

Good

Punjab

74

Own, private

87

Good

U.P

60

Own, private

87

Good

Gujarat

Purchase source

Good

Problems in usage of organic inputs

Absolutely, organic farmers did not face any problems in usage of seeds. But, the
preservation, multiplication and accessibility of local varieties should be made
through local research centers or state agricultural universities. Many organic
farmers practicing mixed cropping systems for biological fixation of N in the soil.
They are also growing boarder crops or live fence plants for the control of pests
attacks. In case of vermi-compost, the sample farmers did not express any problems
in its usage. The real problem is about its efficacy in farmers field. The farmers are
not able to judge its efficiency by seeing it physically. So, product standardization
and certification should be made mandatory for marketing. Very few farmers are
experiencing the problem of micro-nutrient deficiency (zn, mn, fe etc) when they
turned from conventional to organic farming, especially in case of orchards.

Farmers are really looking for more awareness/training programs in case of usage of
bio-fertilizers. The quality of bio-fertilizers is always questionable? Strict supervision
and monitoring are needed for implementation of production standards and efficacy
of bio-fertilizers. Most of the botanical pesticides are prepare by farmers themselves.
The main problem is in its application. Most of the botanical pesticides can only be
applied through manual sprays due to their sticky nature. It takes lot of time for
farmers to apply in his entire field. Thus, refinement of botanical pesticides to spray
through power sprays would help the farmers very much. Similarly, more awareness
and training programs are needed for the usage of bio-pesticides like Trichoderma
viride, Pseudomonas, Beauvaria, Verticillium etc.

195

6.3 Issues in marketing of organic inputs


Nearly half of the sample promoters expressed that they are facing severe marketing
problems in marketing of the vermi-compost. As the earlier results summarized, the
demand for vermi-compost was low in the villages. Promoters were trying hard to
market their output. Many times, farmers were succeeded to market only a fraction of
output. Even in some extreme cases, they were applying to their own fields/crops. In
most of these transactions, the sales were on credit basis. Promoters were not able
to get the returns in time. The delay in payments, some times raises the question of
long term sustainability of the units. Due to low demand from the market, the buyers
were offering very low prices for vermi-compost. The total gross returns from vermicompost unit were not meeting the total costs. Actually, many of the promoters were
incurring most of their family labor in the production of vermi-compost. But, if we
quantify all those contributions, it is not a viable proposition. There were many
hidden costs in the vermi-compost production system. At the same time, absence of
proper market channels exacerbates the situation. Even though the government
formulated specific standards for some organic inputs, but lack of their
implementation ruin the market. Its giving an opportunity for adulteration of organic
inputs in the market. Lack of proper licensing and certification system was
discouraging many promoters to export their organic inputs. Finally, the government
or NABARD should come up with a plan to backend the sales of compost/organic
inputs.

**********************

196

Chapter VII
Economics and Efficiency of Organic Farming in India
Organic farming systems have attracted increasing attention over the last one
decade because they are perceived to offer some solutions to the problems currently
besetting the agricultural sector. Organic farming has the potential to provide
benefits in terms of environmental protection, conservation of non-renewable
resources and improved food quality. Some countries like Europe have recognized
and responded to these potential benefits by encouraging farmers to adopt organic
farming practices, either directly through financial incentives or indirectly through
support for research, extension and marketing initiatives. As a consequence, the
organic sector throughout Europe is expanded rapidly (24% of worlds organic land).
But, in the developing countries like India, the share is around 2 per cent only
(included certified and wildlife). There is considerable latent interest among farmers
in conversion to organic farming. However, some farmers are reluctant to convert
because of the perceived high costs and risks involved. Those who have converted
earning equal incomes to their conventional counterparts, if premium markets are
exist for organic produce. Despite the attention which has been paid to organic
farming over the last few years, very little accessible information actually exists on
the costs and returns of organic farming. So, this chapter made an assessment on
these issues in different states of India. A brief profile of organic farmers was also
discussed in this chapter.

Sample coverage

As described in Chapter IV, the study has chosen a random sample of fifteen organic
farmers per state. Thus, a total of 60 organic farmers were interviewed thoroughly
regarding socio-economic details, cropping patterns, costs and returns of major
crops and problems in organic inputs usage etc. Similarly, a random sample of
fifteen conventional farmers was also interviewed per state in the same vicinity for
crop economics data. A well designed questionnaire was developed, pre-tested and
administered to these sample farmers. The distribution of sample farmers in different
states is presented in table 7.1.

Table 7.1 Distribution of organic sample farmers


State

Gujarat

Maharashtra

Punjab

Uttar Pradesh

District

Kutch

Taluka

Rapar

Faridkot and
Fatehgarh Sahib
Jaito, Fatehgarh
Sahib

Saharanpur and
Muzaffarnagar
Gudamp, Thana
Bhawan, Titron

Villages

Kedianagar,
Bhutakya,
Padampar

Sangli and
Kholhapur
Walwa, Panahala,
Hatkangale,
Karver
Chikurde, Kodali,
Nilewadi,
Talasande, Kerli,
Bhuyewadi

Dabrikhana,
Chaina,
Randhawa,
Badhou Chikalan,
Satabgarh

Gudamp, Thana
Bhawan,Nabada,
Bhaneda Udda,
Gagor

The sixty organic farmers identified for the study from four states were completely
organic farmers. Most of them were totally transformed and adopting in their entire
farm land. But, a fraction of sample farmers were doing it strictly in piece of their farm
land. However, all the farmers were following organic practices in all crop rotations or
through out the year. The organic farming methods are varying from state to state
and place to place. Farmer convenience, resource availability, family labor
participation and premium prices for the crops were the most influencing factors in
adopting the organic farming.

The details of socio-economic profile of sample organic farmers are summarized in


table 7.2. The primary occupation of the most of sample farmers (96%) was
agriculture. Nearly 60 per cent of the sample farmers were dependent on livestock
for their secondary sources of incomes. About one sixth of sample relies on business
while almost the same proportion also does service jobs for their additional incomes.
Overall, nearly 20 per cent sample farmers were illiterate. The proportion of illiterate
farmers was the highest in case of Gujarat when compared to other states. Most of
the farmers (43.3%) had only primary education i.e., up to 10th class standard. About
three

fourths

of

organic

farmers

were

members

in

different

village

committees/organizations. Most of the farmers in Gujarat were members in Fair


Trade Cotton Growers Association at Rapar. The average size of the family was the
highest in Maharashtra while it was the lowest in case of Gujarat. Most of the sample
farmer families in Maharashtra are joint in nature where as they are nucleated in
case of Gujarat state. The size of average land holding was the highest in Punjab
followed by U.P, Gujarat and Maharashtra. The size of land holding was low in

198

Maharashtra when compared with other three states. The nature of soil in Kutch
region was sandy with limited ground water irrigation potential. The soils in
Maharashtra are deep to medium black in nature while the soils in Punjab are mostly
alluvial type. In case of U.P, alluvial, chalka and sandy soil types were observed.

Table 7.2 Socio-economic details of organic farmers (no.)


Item

Gujarat

Maharashtra

Punjab

Uttar Pradesh

14
1

14
1

15
0

15
0

10
0
0
5

9
5
1
0

7
3
5
0

10
2
3
0

Primary occupation
a. Agriculture
b. Service
Secondary occupation
a. Livestock
b. Business
c. Service
d. None
Education status
a. illiterate
b. up to 10th class
c. up to degree
d. up to P.G
Other position if any
a. Yes
b. No
Avg. family size

7
8
0
0

2
8
4
1

2
5
4
4

1
5
7
2

13
2
6.0

11
4
12.6

10
5
7.9

11
4
10.2

Avg. land holding (acre)

16.8

7.8

28

18.8

Sandy

Black and chalka

Alluvial
and black

Alluvial, red
and sandy

Soil type

The nature of cropping patterns in the study region is presented in table 7.3. The
nature of agriculture in Kutch region of Gujarat is cultivation of irrigateddry crops.
The sample farmers grew either cotton sole or castor sole or cotton+ castor inter
crop in kharif season. During rabi season, they go for either cumin or sesamum crop.
Most of the farmers in this region buy all types of crop inputs from Agrocel Industries
Ltd. In case of Maharashtra, sugarcane was the major crop observed in the sample
farms. They also practice either paddy-wheat or paddy vegetable crop rotations.
Most of the sample farmers self-sufficient and did not depend on outside market for
organic inputs. Paddy followed by wheat is the most prominent cropping system
found in Punjab sample farms. Sometimes, they also rotate paddy with vegetables
like cubbage, cauliflower, potato etc based on the market demand. Sugarcane was

199

also a major crop in Uttar Pradesh state. Paddy wheat or paddy mustard
cropping systems were the other common crop rotations.

Table 7.3 Summary of cropping patterns in the study area


Item

Different Crop rotations

Cotton + Castor sesamum


Cotton Cumin
Castor Bajra
Maharashtra Sugarcane
Paddywheat
Paddy vegetables
Punjab
Paddy wheat
Paddy vegetables
Cotton- wheat
Uttar Pradesh Sugarcane
Paddy wheat
Paddy mustard
Gujarat

7.1 Economics of organic farming vis--vis conventional farming


7.1.1 Brief review of literature
Lampkin (1994) summarized various studies conducted on economics of organic
farming in different crops in South and West of England and parts of Scotland and
Wales. They concluded that the organic farming systems were more diverse in terms
of enterprise mix; have lower yields and higher labor costs which were not
compensated for fully by reduced input costs. Higher prices are essential if organic
farmers are to achieve similar incomes to their conventional counterparts.

Padel and Uli (1994) reviewed several studies on costs and returns of organic
farming in various crops in Germany. Their study revealed that the organic farming
under German conditions was equally profitable with conventional farming. Lower
yields for arable crops were compensated by reduced costs of inputs and premium
prices for most the crops. Many farmers explained that financial stability was the
main reason for converting to organic farming. Introduction of support scheme for
conversion and continuing organic farming also made a significant impact on the
profitability.

200

Dubgaard (1994) studied the economic analysis of organic farming in Denmark. His
results showed that the yield differences were most noticeable for intensive crops
such as wheat and potatoes with organic yields around half the conventional
averages. The organic farms used about twice as much labor per hectare as the
conventional farms. The study also concluded that the substantial price premiums on
output and public support are essential for the economic viability of organic farming
in Denmark.

John (1994) reviewed the various field experiments conducted on organic farming in
Canada. Many sample farms recorded yields that were the same or slightly below
conventional farms. Even though some market regulatory problems exist in case of
organic products, the prices for them were higher (about 30%) than the conventional
products. Overall, the study concluded that 72 per cent of farmers strongly convinced
that organic farming is as profitable as conventional.

Anderson (1994) examined different research studies conducted on organic farming


in USA. They concluded that the lower yields on organic farms contrasted with
conventional farms were balanced by lower production costs. The noted differences
between economic performances of organic and other farms may be due to farm
size rather than farming system. During the study period, the US organic producers
did not receive any benefit from the environmental advantages except to the extent
that consumer willing to support by paying a premium.

Wynen (1994) carried out a review study on organic farming in Australia. He


concluded that the wheat yields were almost similar between organic and
conventional farms. The study also indicated that the variability of wheat yields on
organic farms was lower than on conventional farms. The financial results of two
groups of farmers per hectare were remarkably similar.

Singh et al (2006) examined the economics of organic farming in Uttaranchal (India)


and concluded that cultivation of paddy yielding more profits than wheat cultivation.
Shirsagar (2008) studied the impact of organic farming on economics of sugarcane
cultivation in Maharashtra (India) and concluded that the yields were low in organic
farms than conventional farms but compensated by price premiums. Raj kumar
201

(2009) analyzed economics of carrot cultivation in Nepal and found that higher costs
and revenues in inorganic farms while higher benefit cost ratio was observed in
organic farms.

From review of various studies, it can be concluded that absolutely yields are lower,
but yield differences relative to conventional systems vary depending on the
enterprise and intensity of farming. The cost of variable inputs like agrochemicals
was lower. Gross margins may be similar or higher depends on premium prices
available in the market. Usage of labor was higher and other fixed costs were similar.
Economics of paddy (basmati) cultivation in Punjab
The per acre economics of paddy cultivation in Punjab state is presented in table
7.4. The primary data on cost of cultivation of paddy (basmati) under organic and
conventional farming were collected in Faridkot and Fatehgarh Saheb districts during
November, 2009. Most of the sample organic farmers in this region are following the
concept of Natural farming or Zero-budgeting. The cost of production (variable) per
quintal of paddy was Rs.701 under organic farming (OF) where as Rs.427 in
conventional farming (CF). It is almost 64 per cent higher in OF than CF. The
average cost of cultivation of paddy in OF was Rs.9325 per acre while the same in
CF was Rs.7818 per acre. The cost of cultivation was nearly 19 per cent higher in
OF when compared to CF. The average yield per acre of paddy was 13.35 and
18.36 quintals respectively in OF and CF. The absolute difference between the yield
levels was 5.01 quintal per acre. But, the unit price of paddy was higher (30 percent)
in OF relative to CF. There was no significant unit price differences in fodder prices.
The average net returns per acre of paddy cultivation were Rs. 17828 and Rs.20897
respectively in OF and CF. However, the differences between the gross returns per
acre of these farming were marginal (Rs.1562 only).

Among the different cost break-ups, the real costs on weeding and harvesting
operations were significantly higher in OF when compared to CF. It clearly indicates
the more labor incentive nature of OF than CF. The relative costs on fertilizer
application was higher in OF while the same on plant protection was higher in CF.
The marketing costs were higher under organic paddy because they have to carry
product to specific mandi rather than local mandi for fetching the premium prices.
202

The costs on the remaining cost items were more or less equal in both types. Since,
the organic farmers were practicing organic methods from two or three years, it takes
some more time to stabilize or increase the yields further under organic farming. The
premium prices for paddy helping the organic farmers in Punjab to cover their higher
costs to some extent.
Table 7.4 Economics of Paddy cultivation in Punjab (Rs per acre)

Land preparation
Seed cost
Sowing cost
Fertilizer cost
Inter cultivation/Weeding
Plant protection cost
Irrigation cost
Harvesting cost
Threshing cost
Marketing cost
Other costs
Total cost of cultivation

OF
1265
320
1790
1955
1245
310
310
1180
510
440
0
9325

CF
1307
279
1815
1760
471
928
72
771
300
115
0
7818

CF=100
97
115
99
111
264
33
431
153
170
383
119

Yield (Kg)
Price (Rs)
Fodder (Qtl)
Price (Rs)
Total revenue

1335
19.5
11.2
100
27153

1836
15
12.5
94
28715

73
130
90
106
95

Net returns
Cost of production (per Qtl)

17828
701

20897
427

85
164

Economics of wheat cultivation in Punjab


The comparison of cost of cultivation of wheat between organic and conventional
farming methods in Punjab is presented in table 7.5. The costs and returns on wheat
data pertains to cropping year 2009-2010. Most of sample organic farmers in the
state were cultivating Bansi (local) variety of Wheat. The cost of production per
quintal was Rs.644 under OF. But, the same in case of CF was Rs.315. The cost of
production per quintal of wheat was more than double in OF. It was due the lower
(nearly half) yields under organic farming. But, the overall cost of cultivation per acre
was slightly higher (17 per cent) in OF when compared to CF. The market price
realization of per kg wheat was significantly higher in OF (117 percent). However,
the gross returns per acre of wheat cultivation in Punjab were Rs.28747 and

203

Rs.24755 respectively for OF and CF. This indicates almost 16 per cent higher gross
returns per acre of wheat under OF over CF. However, the per acre net returns
difference between OF and CF was Rs.2889. It clearly shows the high profitability of
wheat cultivation under organic farming in Punjab. As the organic farmers gains
more experience under OF, higher yields can be expected on par with CF.

Among the different crop operations, the higher costs under organic farming were
observed in weeding, harvesting and threshing. Most of sample organic farmers are
following manual harvesting and threshing practices for good quality of wheat grains
and straw. Due to that the costs on labor per acre was higher under OF. The costs
on fertilizers and plant protection chemicals were significantly higher under
conventional farming. The lower fodder yields were noticed under OF because of
lower yields. Overall, there is huge potential for domestic as well as export of organic
wheat from Northern states.
Table 7.5 Economics of Wheat cultivation in Punjab (Rs per acre)

Land preparation
Seed cost
Sowing cost
Fertilizer cost
Inter cultivation/Weeding
Plant protection cost
Irrigation cost
Harvesting cost
Threshing cost
Marketing cost
Other costs
Total cost of cultivation

OF
1050
1240
275
1163
1350
92
142
1300
710
217
0
7539

CF
1010
1285
261
1520
495
435
130
840
330
130
0
6436

CF=100
104
96
105
77
273
21
109
155
215
167
117

Yield (Kg)
Price (Rs)
Fodder (Qtl)
Price (Rs)
Total revenue

1170
22.3
11.4
233
28747

2042
10.3
16.4
227
24755

57
217
70
103
116

Net returns
Cost of production (per Qtl)

21208
644

18319
315

116
204

204

Economics of cotton cultivation in Punjab


The details of economics of organic cotton farming vis--vis conventional farming are
summarized in table 7.6. The costs and returns of cotton cultivation from sample
organic as well as conventional farmers were collected during the cropping year
2009-2010. Many of the sample organic farmers were cultivating desi variety of
cotton where as conventional farmers were growing Bt cotton varieties. The cost of
production per quintal of cotton under OF was Rs.662 while the same in case of CF
was Rs.1112. The cost of production in OF was almost 40 per cent lower than CF.
The average cost of cultivation per acre of cotton were Rs.5427 and Rs.12455
respectively under organic and conventional farming. There is a huge difference of
Rs.7028 (66 %) between these farming types. The mean yield per acre of OF was 73
per cent of conventional farming. The unit price realization of cotton was almost
same under both production systems. Total gross returns per acre of organic farming
were 72 per cent of conventional farming. But, in case of net returns per acre, the
share increased to 90 per cent. The average differences between the OF and CF net
returns per acre was Rs.1935. It clearly demonstrates the high potential of organic
cotton farming when compared to conventional farming in Punjab.
Table 7.6 Economics of Cotton cultivation in Punjab (Rs per acre)

Land preparation
Seed cost
Sowing cost
Fertilizer cost
Inter cultivation/Weeding
Plant protection cost
Irrigation cost
Harvesting cost
Threshing cost
Marketing cost
Other costs
Total cost of cultivation

OF
967
125
150
333
1332
33
380
1967
0
140
0
5427

CF
850
1250
125
2250
650
4550
150
2500
0
130
0
12455

CF = 100
114
10
120
15
205
1
253
79
108
44

Yield (Kg)
Price (Rs)
Fodder (Qtl)
Price (Rs)
Total revenue

825
28
0
0
23100

1125
28.5
0
0
32063

73
98
72

Net returns
Cost of production (per Qtl)

17673
662

19608
1112

90
60

205

Among various cost components, inter cultivation /weeding and irrigation costs were
higher in organic farming. But, the costs on seeds, fertilizers and plant protection
chemicals were significantly higher in conventional farming. Actually, the major
problem for organic cotton farming was lack of premium prices. Establishment of
organic cotton export channels either by government or private organization would
really enhance the incomes of the farmers in Punjab. The results clearly reveal that
the organic farmers can safely earn almost equal amount of net margins per acre as
conventional farmers.
Economics of paddy cultivation in Uttar Pradesh
The costs and returns of paddy (basmati) cultivation both under organic and
conventional farming types are presented in table 7.7. The primary data on sample
organic and conventional paddy cultivation was collected from Ahmednagar district
of Uttar Pradesh pertains to the cropping year 2009-2010. Most of the sample
organic farmers are practicing the method of Natural farming or Zero-budgeting
concept in their farms. The most common basmati varieties growing in this region
are Pusa 1 and Pusa -1121.

Table 7.7 Economics of paddy cultivation in Uttar Pradesh (Rs per acre)

Land preparation
Seed cost
Sowing cost
Fertilizer cost
Inter cultivation/Weeding
Plant protection cost
Irrigation cost
Harvesting cost
Threshing cost
Marketing cost
Other costs
Total cost of cultivation

OF
3482
501
1136
1082
622
350
2281
2082
1555
140
0
13231

CF
3444
511
1400
930
375
521
3300
2214
1671
80
0
14446

CF = 100
101
98
81
116
166
67
69
94
93
175
92

Yield (Kg)
Price (Rs)
Fodder (Qtl)
Price (Rs)
Total revenue

1518
15.8
10.5
70
24719

1807
16.9
11.8
93
31636

84
93
89
75
78

Net returns
Cost of production (per Qtl)

11488
870

17190
803

67
108

206

The average cost of production per quintal of paddy (basmati) under organic farming
was Rs.870 while the same in conventional farming was Rs.803. The cost of
production per quintal under OF was 8 per cent higher than CF. The mean yield per
acre in OF accounted for 84 per cent of the conventional farming yield. The average
gross returns per acre of conventional farming were nearly 28 per cent higher than
organic farming. The average net returns per acre of paddy cultivation were
Rs.11488 and Rs.17190 respectively for OF and CF. No premium prices were
available for organic paddy in Uttar Pradesh. The yield levels under organic farming
were lower (16%) than conventional farming. The fodder yields per acre were also
lower in organic farming. Among different cost items, weeding cost was significantly
higher in organic farming. The costs on plant protection chemicals and irrigation
were significantly higher in conventional farming. It clearly indicates that organic
farming increases water-use-efficiency of the farm. Lack of premium prices as well
as absence of export market channels limits the expansion of organic farming in the
state.
Economics of sugarcane cultivation in Uttar Pradesh
The detailed break-up of the cost of cultivation of sugarcane in Uttar Pradesh state is
presented in table 7.8. Most of the sample organic farmers were growing CoS 88230
variety of sugarcane while majority of conventional growers were using CoS 88230
or CoS 767 varieties.

The cost of production of sugarcane per ton was Rs.820 under organic farming. But,
the cost of production per ton was 16 per cent higher under conventional farming.
The mean yield per acre was 12 per cent higher under organic farming. The average
cost of cultivation per acre of organic farming accounted for 97 per cent of the
conventional farming cost. The gross returns per acre of OF was 9 per cent higher
than CF. However in case of the net returns per acre, this value gone up to 19 per
cent. The results conclude that the cultivation of sugarcane was more profitable
under organic farming than conventional farming. Premium prices did not exist for
organic sugarcane production in U.P. Creation or addition of premium price would
further increase the profitability of organic sugarcane production.

207

Among different cost components, the costs were more or less equal in both types of
farming systems. One of the major benefits under organic sugarcane cultivation was
the crop can thrive for more than three years without any yield loss. So, organic
farmers can significantly reduce their seeds and sowing costs and reap more
benefits. Production of organic jaggary or any other value addition measures would
further boost organic sugarcane production in the state.
Table 7.8 Economics of sugarcane cultivation in Uttar Pradesh (Rs per acre)

Land preparation
Seed cost
Sowing cost
Fertilizer cost
Inter cultivation/Weeding
Plant protection cost
Irrigation cost
Harvesting cost
Threshing cost
Marketing cost
Other costs
Total cost of cultivation

OF
2892
4090
1514
1935
3113
420
2750
3495
0
2190
0
22399

CF
3533
5065
1313
1904
3217
687
2687
2847
0
1846
0
23099

CF = 100
82
81
115
102
97
61
102
123
119
97

Yield (Kg)
Price (Rs)
Fodder (Qtl)
Price (Rs)
Total revenue

27364
1.95
0
0
53360

24333
2.02
0
0
49153

112
97
109

Net returns
Cost of production (per ton)

30961
820

26054
951

119
86

Economics of wheat cultivation in Uttar Pradesh

The economics of wheat cultivation under organic farming vis--vis conventional


farming is summarized in table 7.9. Most of sample organic farmers were cultivating
Bansi or 292 varieties of wheat. But, many conventional farmers were growing PBW343 or WL-711 varieties. The cost of production of wheat per quintal was Rs.620
under organic farming. The same under conventional farming was slightly lower at
Rs.609 per quintal. But, the average cost of cultivation per acre was lower in organic
farming (8 per cent) when compared to conventional farming. The average yield
levels were 1519 and 1682 kg respectively under OF and CF. However, the gross
returns per acre was higher (15 per cent) in organic farming than conventional

208

farming. This share has further gone up to 39 per cent in case of net returns per
acre. The unit price realization was 28 per cent higher in OF. These results clearly
demonstrate that the cultivation of wheat under organic farming is more profitable
than conventional farming method.
Between different cost components, the costs on weeding and inter culture was
higher in organic farming. But, the costs on irrigation were higher under conventional
farming. Further expansion in green or organic export marketing channels will yield
higher net incomes per acre to farmers in U.P state.
Table 7.9 Economics of wheat cultivation in Uttar Pradesh (Rs per acre)

Land preparation
Seed cost
Sowing cost
Fertilizer cost
Inter cultivation/Weeding
Plant protection cost
Irrigation cost
Harvesting cost
Threshing cost
Marketing cost
Other costs
Total cost of cultivation

OF
2298
1281
663
981
656
85
994
1510
844
106
0
9418

CF
2571
1034
674
1054
432
214
1532
1674
879
159
0
10223

CF = 100
89
124
98
93
152
40
65
90
96
67
92

Yield (Kg)
Price (Rs)
Fodder (Qtl)
Price (Rs)
Total revenue

1519
13.4
14
222
23463

1682
10.5
13.8
193
20324

90
128
101
115
115

Net returns
Cost of production (per Qtl)

14045
620

10101
609

139
102

Economics of sugarcane cultivation in Maharashtra


The cost of cultivation of sugarcane per acre in Maharashtra between organic and
convention farming is compared in table 7.10. The primary data on economics of
sugarcane cultivation under both the methods were collected in Warana district of
Maharashtra. Most of sample organic farmers are practicing the method of Natural
Farming or Zero-budgeting concept. The most popular varieties under organic and
conventional farming systems are Co-86032 and CoC-671/ Co-8014 respectively.

209

The cost of production of sugarcane per ton was Rs.589 in case of organic farming
where as the same under conventional farming was Rs.745. The COP under OF
accounted for 79 per cent of the same in CF. The mean cost of cultivation per acre
was lower (20 per cent) under organic farming compared to conventional farming.
The average yields were almost equal under both the farming systems. The gross
returns per acre was slightly higher (8 per cent) under OF than CF. But, the
difference has increased to 35 per cent in case of net returns per acre. The results
clearly lend support to organic farming in Maharashtra than conventional farming.
Most of the sample organic farmers are also adding value through organic jaggery
production and syrup preparation. Among different break-up costs, the costs on
sowing and irrigation were slightly higher under organic farming than conventional
farming. But, the costs on fertilizer application and plant protection chemicals were
significantly higher under conventional farming. Overall, development of export
marketing channels will create lot of value addition to organic jaggery in
Maharashtra.
Table 7.10 Economics of sugarcane cultivation in Maharashtra (Rs per acre)

Land preparation
Seed cost
Sowing cost
Fertilizer cost
Inter cultivation/Weeding
Plant protection cost
Irrigation cost
Harvesting cost
Threshing cost
Marketing cost
Other costs
Total cost of cultivation

OF
3675
4825
1313
2344
3313
275
3588
2375
0
838
0
22546

CF
4100
5300
1120
5450
4300
1550
3040
2700
0
760
0
28320

CF = 100
90
91
117
43
77
18
118
88
110
80

Yield (Kg)
Price (Rs)
Fodder (Qtl)
Price (Rs)
Total revenue

38375
1.6
0
0
61400

38000
1.5
0
0
57000

101
107
108

Net returns
Cost of production (per ton)

38854
589

28680
745

135
79

210

Economics of cotton cultivation in Gujarat


The detailed break-up of cost of cultivation of cotton in Gujarat is presented in table
7.11. The primary data was collected on both organic and conventional farming in
Kutch district of Gujarat. Most of sample organic farmers were growing devraj variety
while many of the conventional farmers cultivating Bt cotton or V-797 variety of
cotton. Agrocel Industrial Limited at Rapar office is providing the technical service,
inputs and buyback arrangements for organic farmers.

Table 7.11 Economics of cotton cultivation in Gujarat (Rs per acre)

Land preparation
Seed cost
Sowing cost
Fertilizer cost
Inter cultivation/Weeding
Plant protection cost
Irrigation cost
Harvesting cost
Threshing cost
Marketing cost
Other costs
Total cost of cultivation

OF
939
206
443
1586
1946
110
1161
3515
0
0
0
9906

CF
1600
281
375
2675
1800
478
1291
3525
0
63
0
12088

CF = 100
59
73
118
59
108
23
90
100
0
82

Yield (Kg)
Price (Rs)
Fodder (Qtl)
Price (Rs)
Total revenue

1263
35
0
0
44205

1400
28
0
0
39200

90
125
113

Net returns
Cost of production (per Qtl

34299
784

27112
863

127
91

The cost of production of cotton per quintal was Rs.784 in organic farming. The cost
of production was almost 10 per cent higher under conventional farming. The mean
average yield per acre of organic farm accounted for 90 per cent of the same in
conventional farm. The average costs of cultivation per acre were Rs.9906 and
Rs.12088 respectively under OF and CF. The COC per acre was almost 22 per cent
higher under conventional farming. The unit price realization under organic farming
was 25 per cent higher when compared to conventional farming. The gross returns
per acre were 13 per cent higher under organic farming than the conventional
farming. But, in case of net returns per acre this gap has become wider (Rs.7187).

211

Overall, the results conclude that the cultivation of cotton under organic farming is
more profitable than conventional farming.

Among different cost components, the costs on fertilizer and plant protection
chemicals were significantly lower under organic farming than conventional farming.
The organic farmers in the study region were enjoying the benefits of Agrocel
Industries in form of quality inputs (seeds, neem cake, castor cake and neem oil etc)
and zero marketing costs. Moreover, organic farmers were getting additional
subsidies from Agrocel Industries for land leveling and buying drip irrigation systems.
In general evaluation made in light of these research results concludes, organic
farming is a production system which has little lower productivity per hectare, needs
more labour and low energy inputs, follows crop rotation regularly, and has a
changing net income level relating with product selling prices.

7.2 Efficiency of organic farming in India


7.2.1 Brief review on farm level efficiency and its determinants
Athreya V.B et al., (1986) examined the controversial issue of farm size and
productivity in case of agricultural production in Tiruchi district, Tamil Nadu. They
argued that the size-productivity framework might not be the most fruitful one for
analyzing the problem of agricultural productivity. The study covered a detailed farm
household economic survey of 367 households in three wet and three dry villages
of Kulithalei and Manaparei panchayat unions of the state. They defined
productivity as the market value of farm production per unit of operated area and did
crop level analysis on different crops. The results of study concluded that a
significant negative relationship between operated area and value of output per acre
at the farm level only for the wet area, but there was no relationship in the
dry ecotype. Even in the wet area, the observed inverse relationship between farm
size and productivity disappeared at the crop level. The intensity of cultivation and
the class status of cultivating households might be more important criteria than size.
Finally, a methodological conclusion arose out of the study was ecological and
historical specifications of a farm economy play an important role in the
determination of productivity than the size.
212

Battese and Tessema (1993) used stochastic frontier production function with timevarying parameters and technical efficiencies using panel data from ICRISATs
Village Level Studies in three Indian villages namely Aurepalle, Shirapur and
Kanzara, during the period between 1975-76 and 1984-85. The specifications of a
linearized version of a Cobb-Douglas stochastic frontier production function with
coefficients which were a linear function of time, the hypothesis that the traditional
response function was an adequate representation of the data was accepted for only
in Aurepalle village. The hypothesis of time-invariant technical inefficiencies was not
rejected for one of the two villages for which significant technical inefficiencies exist.
The hypothesis of time-invariant elasticities of the input variables was rejected for
two (Shirapur and Kanzara) of the three villages. Further, the hypothesis that hired
and family labour was equally productive was accepted in only one of the three
villages. The technical efficiencies of individual farms exhibited considerable
variation in the two villages with either time-invariant or time-varying technical
efficiencies.

Good et al., (1993) carried out technical efficiency and productivity growth
comparisons using panel data of four largest European carders and eight of their
American counterparts using three alternative estimators of Cobb-Douglas stochastic
frontier production model during 1976 to 1986. They identified that the potential
efficiency gains of the European liberalization by comparing efficiency differences
between the two carrier groups. The reductions in inefficiency described that the
amount of inputs can be decreased without altering output. Finally, they concluded
that while nominal efficiency measures were fairly different across these estimators,
the properties of technology and the estimation of an efficiency gap between
European carriers were rather stable. Eliminating the efficiency gap brought a
savings to the tune of $ 4.5 billion per year and a displacement of about 42000
workers across European industry.

Coelli and Battese (1996) investigated the factors influence the technical inefficiency
of Indian farmers using a stochastic frontier production function for farm-level data on
three villages, Aurepalle, Kanzara and Shirapur from diverse agro-climatic regions of
the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT). The
variables considered in the model for the inefficiency effects include the age and
213

level of farmers, farm size and the years of observation. The results indicated a
significant random component in the inefficiencies effects in all three villages and
that the above four factors have a significant influence upon the size of the
inefficiencies of farmers in Kanzara and Shirapur, but not in Aurepalle. Farm size
and year of observation were inversely related to the level of technical inefficiency in
all villages whereas the effects of age and education of the farmers were found
negatively related to the level of technical inefficiency in two out of three villages.
They also indicated that there were significant differences in the behaviour of value
of output and inefficiencies of production in different regions.

Bokusheva and Hockmann (2005) investigated the causes for production variability
in Russian agriculture. They found that the production risk and technical inefficiency
as two major sources of production variability. The study used a panel data of 443
large agricultural enterprises from three regions of Russia from 1996 to 2001. They
concluded that the production function specification accounting for the effect of
inputs on both risk and technical inefficiency was found to explain appropriately than
the traditional stochastic frontier formulation. Study also found that the output
variability was explained mainly by production risk. The estimates indicated that
there were significant differences in production technologies in the three regions not
only for the production elasticities but also for the impact of technological change.
Finally, the study suggested that the future research is needed to analyze the
farmers response to production risk and their adjusting behaviour.

Olson and Vu (2007) analyzed the economic efficiency and factors explaining it
among Minnesota farm households using DEA method. After studied 400 farm
sample data between 1993 and 2005, they concluded that there was a considerable
degree of inefficiency in Minnesota farms. On average, initial technical efficiency,
scale and allocative efficiency were 0.90, 0.88 and 0.77 per cent respectively. The
study also employed bootstrapping to determine the variability of DEA technical
efficiency estimates and to correct for the bias inherent in the deterministic
measurement. The bias-corrected point estimate of technical efficiency was 0.77.
Tobit analysis was employed in the second step to evaluate factors influencing
efficiency in the study. The results concluded that a higher current asset share, lower
debt-to-asset ratio and higher non-farm income were associated with higher
214

efficiency levels. Higher tenancy ratio was coupled with low technical efficiency
showed improvements were needed in managing larger operations and rented
properties.

Adewumi and Adebayo (2008) examined the profitability and technical efficiency of
sweet potato production in Kwara state of Nigeria using stochastic frontier production
function. A sample of 152 farmers cross-sectional data were collected from Oyun
and Offa local government areas. The study revealed that a positive gross margin of
N15, 29315 per ha. Farm size, planting material and labor inputs were significant
variables having positive impact on sweet potato production while fertilizer were
found to have a negative effect. The study further revealed a mean technical
efficiency of 0.473. This indicates that the input usage can be increased by 52.7 per
cent. The increase in educational level, farm size and contacts with extension agents
have showed tendency of reducing the inefficiency in sweet potato production.
Access to credit sources and membership in the associations has also shown
positive and significant relation to technical efficiency. Household size was
negatively and significantly correlated with technical efficiency.

Begum et al., (2009) studied the application of DEA to evaluate technical, allocative
and economic efficiency of poultry farms in Bangladesh. The results of the study
revealed that under CRS and VRS specification, on average, the farms technical,
allocative and economic efficiencies were 88, 70, 62 per cent and 89, 73, 66 per cent
respectively. The CRS and VRS sampled farms were 12, 30, 38 per cent and 11, 27,
34 per cent respectively, below what could be achieved. The farm households
appear to be dominantly increasing returns to scale. Evaluating factors associated
with efficiency suggested that farmers educational background, experience, training,
family size, and poultry farm size were most statistically significant factors
contributed to efficiency.

Ayinde et al., (2009) assessed the determinants of technical efficiency and varietalgap of rice production in Nigeria. A random sample of 675 farmers was selected from
three out of six geographical zones in Nigeria. The farmers in this study were
classified into three groups according to the variety of rice they planted. The three
main varieties of rice planted are local (Ofada), improved (Mai-Nasara) and New
215

Rice for African (NERICA). The technical efficiency indices were computed using the
meta-frontier approach because production varieties and technologies were
expected to differ between the three varieties. This method allows the measure of
the varietal-differences which is the Technology Gap Ratio (TGR). Estimates of the
frontier were obtained assuming a translog functional form. Results revealed mean
technical efficiency of 55%, 58% and 57% for Ofada, Mai-Nasara and NERICA
varieties, respectively. Farm size, hired labour, fertilizer, seed, age, gender,
household size and amount of credit are the determinants of technical efficiency of
farmers in Nigeria rice production. The average values of varietal technology gap
were more than 0.83 in all the varieties.

Ross et al., (2009) assessed the nonparametric efficiency analysis of small-scale


Bean producer farmers (both climbing and bush bean types) in North and South
Kivu, Democratic Republic of Congo. Data used in this study were obtained from the
survey Visite 1: Structure du Menage et Production, which was conducted between
December 2006 and May 2007. On an average, farms were 66 per cent technically
efficient. The results concluded that the North Kivu bean producers have higher
technical efficiency scores than South Kivu producers. Similarly, the climbing beans
have higher technical efficiency scores than bush beans. The Tobit model was used
to identify the correlation of efficiency to other characteristics associated with each
field. Variables like age, field size showed negative relationship with technical
efficiency.

It is clear from various studies that every effort to promote organic farming could be
invalidated if individual farms do not reach adequate productive and efficiency levels
(Lampkin and Padel, 1994; Offermann and Nieberg, 2000). This means that any
policy effort in supporting conversion to organic farming needs an adequate level of
efficiency of individual farms to achieve success (Tzouvelekas et al., 2002a). This
would imply that organic farming must strive to be efficient both productivity and
economically. Therefore, development of organic methods raises significant research
questions related to productivity and efficiency. Studies on productivity are certainly
relevant, but also efficiency analysis provides useful information on the convenience
or otherwise of adopting organic techniques (Cembalo and Cicia, 2002). The
comparative studies between organic and conventional farms, efficiency analysis is
216

particularly suitable for assessing the farmers relative ability in optimizing internal
resources. Further more, the utilization of an efficiency estimation approach is
advisable in studies aimed at providing policy indications (Coelli et al., 2002; Lovell
1995).

But, there are only a few attempts of comparing efficiency between organic and
conventional production systems. Several studies were conducted by Tzouvelekas et
al. (2001a, b; 2002a, b) on Greek agriculture. The authors used a parametric
approach to evaluate olive, cotton and durum wheat farms and obtained
controversial results. In the analysis on cotton farms, Tzouvelekas et al. (2001b)
found that technical efficiency (TE), with respect to their specific technology (organic
and conventional) was higher in conventional farmings favour. On the other hand,
the studies on olive-growing and durum wheat-growing demonstrated the improved
ability of organic farmers in minimizing inefficiency (regarding their specific
technology). Oude Lansink et al. (2002) compared efficiency measures of organic
and conventional farms in Finland. They suggested that organic producers have
higher technical and sub-vector efficiencies than conventional farms in their own
reference groups, but overall efficiency measures suggest that organic farms are
using less productive technology. In Italy, Madau (2005) applied a stochastic frontier
production model and found that conventional cereal farms were significantly more
efficient than organic cereal farms, with respect to their specific technology, which
counter the findings from Tzouvelekas et al. (2001a, 2002a). In another recent study,
Larsen and Foster (2005) compared efficiency measures of organic and
conventional farms in Sweden by a non-parametric technique. Their results indicate
that the average efficiency scores of the organic producers are lower than the
average efficiency of the conventional producers.

Fabio (2007) analyzed the technical efficiency in organic and conventional farming
on Italian cereal farms. He applied stochastic frontier model to estimate technical
efficiency in a sample. All the observed farms were in Sardinia and they participated
in the official Farm Accountancy Data Network (FADN) during 2001 and 2002.
Translog functional form of production function was applied to measure the efficiency
in the farms. The likelihood test results suggested that the organic and conventional
farms in the sample would lie on two different frontier production functions. The
217

estimated TEs for conventional and organic practices are, on average, 0.902 and
0.831 respectively. This concludes that organic farmers were less efficient than
conventional farmers, relative to their specific frontier technology. The conventional
cereal-growing tends to be more productive than organic production and the gap
between them should be interpreted as an absolute advantage of traditional farms.
The results that enforcing some horizontal measures like professional training and
extension services would improve the ability of organic farmers.

Cisilino and Madau (2007) compared the organic and conventional farming in Olive
farms using Italian FADN database. In order to identify some of the main differences
between organic and conventional farms a distance analysis was used. The study
highlighted some of the main characteristics of those two groups of farms to better
address differences in production technology, costs and revenues. They also
estimated differences in

efficiency and productivity between

organic and

conventional producers using nonparametric method. Results revealed that looking


at the average values on invested areas; conventional farms gross production was
significantly higher than the organic ones, as the net margin, as the net product and
costs. The average values on total labour force instead, shown that, even if
conventional farms still have higher values than organic ones, the distance become
shorter. That means that the two groups are quite similar and that, even if organic
farms still produce a lower economic value, they better compensate productive
factors, especially in terms of labour force. The efficiency analysis found that organic
olive-growing farms were more able in using their disposable resources (with
reference to their own frontier), and the higher efficiency permitted them to
compensate the lower productivity with respect to the conventional farms.

Bayramoglu and Gundogmus (2008) calculated the cost-efficiency between organic


and conventional raisin-producing households in Turkey. They used data
envelopment analysis to compute overall technical and input-specific technical
efficiency measures. The data were collected from fourty-four organic and thirty-eight
conventional producers determined by stratified random sampling. For each
household group the average cost efficiency and technical efficiency coefficients
were 0.712 and 0.862 for organic households, while 0.844 and 0.903 for the
conventional group. According to the coefficients calculated for individual and
218

different returns to scale, study concluded that conventional households are on


average more efficient relative to their own technology.

Funtanilla et al (2009) evaluated the organic cotton marketing opportunity in USA.


They mentioned that according to the Organic Trade Association (OTA), 2004 the
annual growth of organic fiber was 23 per cent. This study was under taken on
organic and conventional cotton growers in 2007 from Texas High Plains (THP) to
estimate their costs and returns, technical efficiency of farms and to identify factors
influencing the efficiency. The results concluded that the average sample organic
farmers produced 976 lbs/acre cotton from irrigated acres, a significantly lower
volume than 1395 lbs/acre cotton harvested by conventional producers under the
same ecosystem. Organic cotton produced from dry land farms is about 649
lbs/acre, while 772lbs/acre were obtained by conventional producers. Dry land cotton
farm yields, on average, are not significantly different across farming systems.
Similarly, higher actual market prices received for organic cotton ($1.27/lb and
$1.15) compared with conventional cotton prices ($0.64/lb and $0.63/lb). The gross
value earned by organic farmers from cotton harvested in irrigated and dry land
acreage in 2007 are $1237/acre and $743/acre, respectively. Conventional cotton
farmers have made $895/acre and $489/acre from irrigated and dry land portions.
On average, the estimated technical efficiencies of sample organic and conventional
cotton farms were 46 % and 78%, respectively. Furthermore, investigating the
variation of farm efficiency scores indicated that all conventional farmers recorded
efficiency rates from 50% to 100%, while only 27% of the organic farms were in the
said range. Interestingly, most organic farms (67%) were found to have an efficiency
level between 30% and 50%. Experience, education, and area showed positive
effect on inefficiency.

Mayen et al., (2010) assessed the technology adoption and technical efficiency of
conventional and organic diary farms in the United States. They addressed selfselection into organic farming by using propensity score matching and explicitly
tested the hypothesis that organic and conventional farms employ a single,
homogeneous technology. The study utilized the 2005 Agricultural Resource
Management Survey on Dairy Costs and Returns Report (ARMS) data for the
comparison. Results rejected the homogeneous technology hypothesis and find that
219

the organic dairy technology is approximately 13% less productive. However, they
found little difference in technical efficiency between organic and conventional farms
when technical efficiency is measured against the appropriate technology.

The objective of this section is to attempt an empirical evaluation of the technical


efficiency achieved by organic farms in comparison with conventional farms, by
utilizing the recently developed DEA model. Interpreting technical efficiency scores
of two different methods of farming always come with an important caveat, i.e. the
higher scores exhibited by one farming system with respect to the other does not
indicate that the former are more efficient by some degree than the latter
(Tzuovelekas, Pantzios, and Fotopoulos 2001, 2002; Oude Lansink et al. 2002). The
sample farms considered in this study are facing different production technologies.
As per review of various studies, higher technical efficiency score of one sample
farm relative to their counterpart means that, on average, the former lay closer to
their specific production frontier than the sample counterpart does with their
respective production frontier. Each observation consists of the gross value of
production per acre as output (Y) and costs on four inputs. They are per acre costs
on seeds (X1), fertilizers (X2), pesticides (X3) and inter culture/weeding (X4). Since
the costs on land preparation, sowing, irrigation, harvesting, threshing and marketing
did not vary significantly among organic and conventional farms, they are not
included in efficiency analysis. In-put oriented DEA model is applied in the analysis.
This type of analysis is expected to illustrate possible efficiency-associated
differences between the two types of farming and provide empirical evidence, which,
at least in the field of organic farming performance, is scarce or even absent. Such
assessments may be useful for pointing out the overall competitiveness of the sector
as well as to assist policy makers in forming suitable policies for the sectors viable
development. This is particularly important, since policy decisions made in the early
stages of a sectors development may decisively affect its future course.
Efficiency of Paddy cultivation in Punjab

The comparison of technical and scale efficiencies of conventional and organic farms
in Punjab are presented in table 7.12. Mean technical efficiency both under CRS and

220

VRS models were higher in conventional farming than organic farming, relative to
their specific frontiers. However, it does not indicate that conventional farms are
more efficient than organic farms to the same degree, because the two practices are
situated on different technology frontiers. It only implies that conventional farms
operate close to their specific frontier than organic farms. Organic (conventional)
farms under CRS assumption would be able to increase the efficiency by 45 per cent
(12.9%) with the present state of technology, using their disposable resources more
efficiently. The scale efficiency is also higher in conventional farming. These results
are in conformity with the study done by Madau (2005) in Italian cereals.
Table 7.12 Frequency distribution of technical and scale efficiencies of paddy
farms
Efficiency

Conventional farming (n=7)

Organic farming (n=10)

CRS-TE

VRS-TE

SE

CRS-TE

VRS-TE

SE

> 25 %

10

10

26-50

14.3

40

30

10

51-75

14.3

14.3

30

10

30

75-100

85.7

85.7

85.7

20

60

50

Max (%)

100

100

100

100

100

100

Min (%)

38.1

66.5

57.4

9.3

31.3

24.7

Mean (%)

87.1

93.8

91.3

55.0

77.9

70.8

Efficiency of wheat cultivation in Punjab

The frequency distribution of technical and scale efficiencies of organic and


conventional wheat farms in Punjab are presented in table 7.13. The average
technical (both CRS and VRS) and scale efficiencies were higher under conventional
farming than organic farming, relative to their production frontiers. The frequency
distribution of technical and scale efficiencies clearly indicates that most of the
conventional farms were in the range between 75 and 100. But, significant sample of
organic farms were distributed under less than 50 per cent category. The minimum
technical and scale efficiency values were very low in organic farming when
compared to conventional farming.

221

Table 7.13 Frequency distribution of technical and scale efficiencies of wheat


farms
Efficiency

Conventional farming (n=12)

Organic farming (n=13)

CRS-TE

VRS-TE

SE

CRS-TE

VRS-TE

SE

> 25 %

38.47

7.69

15.38

26-50

7.69

15.38

7.69

51-75

33.33

16.66

16.66

15.38

30.77

75-100

66.67

83.34

83.34

38.46

76.93

46.16

Max (%)

100

100

100

100

100

100

Min (%)

60.5

72.2

63.6

14.8

24.4

14.8

Mean (%)

86.2

93.0

92.5

55.1

84.2

66.1

Efficiency of cotton cultivation in Punjab


The summary of technical and scale efficiencies of cotton farms in Punjab are
tabulated in table 7.14. Contrary to the earlier findings, the mean technical and scale
efficiencies were higher in organic farms (relative to their production frontiers) than
conventional farms. Most of the sample organic farms were categorized in the range
between 75 and 100 where as many sample conventional farms were between 51
and 75. The minimum technical and scale efficiency values were also more in
organic farming. The results were inconformity with Oude Lansink et al., (2002).

Table 7.14 Frequency distribution of technical and scale efficiencies of cotton


farms
Efficiency

Conventional farming (n= 4)

Organic farming (n= 4)

CRS-TE

VRS-TE

SE

CRS-TE

VRS-TE

SE

> 25 %

26-50

51-75

75

75

25

25

75-100

25

100

25

75

100

75

Max (%)

100

100

100

100

100

100

Min (%)

58.3

58.3

60.3

60.3

Mean (%)

69.5

100

69.5

90.1

100

90.1

Efficiency of paddy cultivation in Uttar Pradesh


The mean, maximum and minimum technical and scale efficiencies of paddy farms
under organic and conventional farming are summarized in table 7.15. The average
technical efficiencies (both under CRS and VRS) were 80.8, 89.0 and 73.4, 87.9 per

222

cent respectively for conventional and organic farming systems. The mean scale
efficiency was 90.4 and 81.6 per cent respectively for CF and OF. The results
indicate that the three efficiencies calculated in the study are higher for conventional
farming than organic farming (relative to their production frontiers). It also suggests
that the technical efficiency (CRS model) can be further improved by 19.2% and
26.6% respectively under conventional farming and organic farming systems. The
organic farms are not able to compensate for their technical disadvantage (less
productivity) with higher efficiency of input use.

Table 7.15 Frequency distribution of technical and scale efficiencies of paddy


farms
Efficiency

Conventional farming (n= 7)

Organic farming (n= 11)

CRS-TE

VRS-TE

SE

CRS-TE

VRS-TE

SE

> 25 %

26-50

14.3

27.27

9.09

51-75

28.6

28.57

28.57

9.09

18.18

27.27

75-100

57.1

71.43

71.43

63.64

72.73

72.73

Max (%)

100

100

100

100

100

100

Min (%)

46.0

61.0

59.0

31.7

48.2

50.9

Mean (%)

80.8

89.0

90.4

73.4

87.9

81.6

Efficiency of sugarcane cultivation in Uttar Pradesh

The frequency distribution of technical and scale efficiencies of sugarcane farms


under conventional and organic farming is presented in table 7.16. In relative terms,
the mean technical and scale efficiencies of organic farms were lower than the
conventional farms. There is a huge difference of technical efficiency (TE) between
CF and OF. Most of conventional farms were distributed in the range between 75
and 100 per cent. In contrary, many of organic farms fell under less than 50 per cent
category. The estimated TE scores suggest that production is not adequately
efficient under organic farming. The results clearly indicate that there is a need for
improvement of efficiency under organic farms through more technical trainings and
field demonstrations.

223

Table 7.16 Frequency distribution of technical and scale efficiencies of


sugarcane farms
Efficiency

Conventional farming (n= 15)

Organic farming (n= 11)

CRS-TE

VRS-TE

SE

CRS-TE

VRS-TE

SE

> 25 %

36.37

27.27

26-50

6.6

27.27

27.27

9.10

51-75

13.4

13.4

6.67

9.09

45.45

75-100

80

86.6

93.33

27.27

45.46

45.45

Max (%)

100

100

100

100

100

100

Min (%)

42.2

68.0

62.0

8.7

12.5

43.9

Mean (%)

87.6

93.4

93.0

45.3

60.3

74.3

Efficiency of wheat cultivation in Uttar Pradesh


The efficiency of wheat cultivation both under conventional and organic farming
systems in Uttar Pradesh is summarized in table 7.17. The mean technical and scale
efficiency values were higher (relatively) in conventional system when compared to
organic system. There is ample scope for further increase in the efficiency of organic
wheat farms in U.P. The conventional farms were relatively closer to their production
frontiers than the distance between organic farms and their frontiers. Nearly 60 per
cent of conventional farms were having the CRS-technical efficiency in the range of
75 to 100 per cent. But, only 30 per cent of organic farms showed this range of
technical efficiency.

Table 7.17 Frequency distribution of technical and scale efficiencies of wheat


farms
Efficiency

Conventional farming (n= 14)

Organic farming (n= 16)

CRS-TE

VRS-TE

SE

CRS-TE

VRS-TE

SE

> 25 %

18.8

26-50

7.10

12.5

6.25

31.25

51-75

28.6

14.3

7.1

37.5

12.5

31.25

75-100

64.3

85.7

92.9

31.2

81.25

37.5

Max (%)

100

100

100

100

100

100

Min (%)

45.5

58.8

54.4

12.6

32.2

27.9

Mean (%)

85.1

90.9

93.3

60.8

89.6

65.2

224

Efficiency of sugarcane cultivation in Maharashtra

The findings from the efficiency of sugarcane cultivation in Maharashtra are


presented in table 7.18. The empirical findings show that the conventional farms
were having higher (97.6 per cent) efficiency than the organic farms (77.6 per cent),
relative to their production frontiers. The result would suggest that there exist ample
margin for the increasing of managerial and technical skills as to improve
performance in organic sugarcane-growing in order to compensate adequately the
gap (with respect to conventional farms) in terms of efficiency. The technical
efficiency of conventional farms ranged from 89.2 to 100 per cent where as the same
in case of organic farms 45.1 to 100 per cent. Moreover, these findings were against
to results obtained by Tzouvelekas et al (2001a) in Olive-farms in Greek.

Table 7.18 Frequency distribution of technical and scale efficiencies of


sugarcane farms
Efficiency

Conventional farming (n= 5)

Organic farming (n= 8)

CRS-TE

VRS-TE

SE

CRS-TE

VRS-TE

SE

> 25 %

26-50

12.5

12.5

51-75

37.5

37.5

75-100

100

100

100

50.0

50.0

100

Max (%)

100

100

100

100

100

100

Min (%)

89.2

89.2

45.1

47.5

89.0

Mean (%)

97.6

100.0

97.6

77.6

79.4

96.9

Efficiency of cotton cultivation in Gujarat


The estimated farm-specific, input-oriented technical efficiency measures for both
farming methods are presented in table 7.19. The average input-oriented technical
efficiency score is 88.2% for organic farms and 76.9% for conventional farms under
CRS model. Hence, conventional farms may be viewed, in general, as more
technically efficient than conventional farms. However, it should be stressed that
since organic and conventional cotton farming represents different production
technologies, organic cotton farms face a different production frontier from the
conventional ones. Therefore the differences between the average technical

225

efficiency score of organic farms and that of conventional farms does not imply that
conventional are more efficient than organic farms, by the same degree.

Table 7.19 Frequency distribution of technical and scale efficiencies of cotton


farms
Efficiency

Conventional farming (n= 4)

Organic farming (n= 14)

CRS-TE

VRS-TE

SE

CRS-TE

VRS-TE

SE

> 25 %

26-50

7.2

7.2

51-75

25

25

42.8

42.8

75-100

75

100

75

50.0

100

50.0

Max (%)

100

100

100

100

100

100

Min (%)

67.7

67.7

50.0

50.0

Mean (%)

88.2

100

88.2

76.9

100

76.9

Overall across different states and crops, the efficiency levels were lower in organic
farming when compared to conventional farming, relative to their production frontiers.
There was only one exception in case of cotton in Punjab where the reverse trend
was observed. The results conclude that there is ample scope for increasing the
efficiency under organic farms. Exposure to more trainings as well as increase in
technical guidance would enhance the efficiency of organic farms.
7.3 Factors influencing efficiency in organic crops
The factors influencing efficiency in the organic crops was analyzed by fitting a
multiple regression equation. The efficiency of farm selected as dependent variable
and it was regressed against different household characteristics. Ordinary Least
Square (OLS) method was employed for estimating regression coefficients in the
regression equation. Due to the limitations in the number of observations, regression
equation was fitted only for wheat crop in Punjab and cotton crop in Gujarat. The
summary of these results are presented in tables 7.20 and 7.21.

Two efficiency parameters (TE-CRS and SE) were used as a dependent variable in
case of organic wheat crop in Punjab. The TE-VRS results were not presented
because it was a very poor fit. Household head characteristics like education,
number of family members participate in the farm, size of land holding (acres) and

226

experience in growing organic wheat crop (years). A dummy variable (Y=1 or N=0)
was used for participation or undertaken any formal training in organic farming.
Another dummy was used for source of organic inputs like seeds and compost etc (if
it is own =1 or bought from market=0).

The best fit among the two regression equations was technical efficiency under CRS
model. Among different factors, education of the household is positive and significant
at 5 per cent level. The participation in the formal training increased the efficiency of
the farms. It is also significant 5 per cent level. None of the other variables were
significant in the regression equation. The increase in number of family labor and
input type both have showed a negative sign, but they are not statistically significant.

The adjusted R-square value for regression equation on scale efficiency was 0.478.
Variables like education, size of land holding and participation in formal training
programs showed a positive relation with scale efficiency. The contribution of family
labor had a negative relationship with scale efficiency. It was statistically significant
at 10 per cent level. The years of experience in growing organic wheat did not
showed any impact on efficiency of farm.
Table 7.20 Determinants of efficiency in organic wheat (Punjab)
Variable
Constant
Education
Family labor
Landholding
Experience
Training (dummy)
Input type (dummy)
R-square
Adjusted R-square
N

CRS- TE
-0.668
(-1.622)
0.543**
(2.488)
-0.690
(-1.576)
0.828
(1.903)
-0.250
(-1.155)
1.163**
(3.245)
-0.364
(-1.275)
0.768
0.537
13

SE
-0.642
(-1.742)
0.451***
(1.947)
-0.952***
(-2.050)
1.039***
(2.247)
0.178
(0.775)
1.275**
(3.352)
-0.391
(-1.291)
0.739
0.478
13

Figures in the parenthesis indicatest values


* Significant at 1 per cent level
** Significant at 5 per cent level
*** Significant at 10 per cent level

227

Table 7.21 Determinants of efficiency in organic cotton (Gujarat)


Variable
Constant
Education
Family labor
Landholding
Experience
Training (dummy)
Input type (dummy)
R-square
Adjusted R-square
N

CRS- TE
0.414
(1.546)
0.471
(1.799)
0.388
(1.482)
-0.446***
(-1.854)
0.424
0.251
14

Figures in the parenthesis indicatest values


* Significant at 1 per cent level
** Significant at 5 per cent level
*** Significant at 10 per cent level

The determinants of efficiency of organic cotton crop in Gujarat are presented in


table 7.18. The adjusted R-square value of the equation was 0.251. Since there was
a correlation between number of family labor and size of land holding, both these
variable were dropped from the equation. Similarly, the dummy on training was also
excluded because all the growers had a formal training with Agrocel Industries Ltd.
Only the dummy variable on input type showed a negative relation with technical
efficiency. It indicates that the farmers who are using their own inputs in the farms
showed less efficiency when compared to the farmers who buy from outside market.

On the whole, the regression results conclude that the education and formal training
programs have significant impact on efficiency of organic farms. The improvement of
organic crop management skills should also be extended to all the family members
working in the farms. More training and demonstration programs are needed for
farmers to increase the quality of their own organic inputs production.

7.4 Suggestion for expansion of organic farming


Suggestions for strengthening of organic farming were elicited both from organic
farmers as well as organic input producers during the field visits. Some of the major
responses are:

228

a. Creation of separate Green channels for organic foods


The major problem of organic producers is absence of separate Green market
channels for organic foods. Most of farmers were selling their organic food in local
conventional market. Lack of recognition and demand from consumers force the
farmers for distress sales. Especially, the farmers who produce organic sugarcane in
U.P and Maharashtra states have no option to sale the organic cane to sugar
factories. Neither it is beneficial to society nor the farmers getting premium prices.
The Public-Private-Partnership (PPP) model of marketing of organic products at
least at the district level will boost marketing of organic sector in the country.
b. Premium prices should be announced for organic products
Another major problem for organic food is lack of premium prices in the market.
Absence or assurance of attractive prices for organic food puts the organic growers
in risky situation. Lower productivity coupled with lack of premium prices for organic
products yields lower returns per acre than conventional farming. So, the
government should announce premium prices for at least staple food crops like
paddy, wheat, jowar, bajra etc.
c. Creation of demand through more awareness programs
Adoption of modern farming has resulted in land degradation and environmental
pollution besides creating a very unsustainable system for mankind. Many long-term
experiments conducted in the world have proved that the organic farming increases
the crop productivity while sustaining the eco-system. Hence, the role of government
is critical in motivating the farmers towards organic farming by more awareness
programs and field demonstrations. These programs should also be aimed to
influence the ultimate consumers about benefits of organic food.
d. Input put/conversion subsidies for organic farming
Conversion from inorganic to organic farming takes a while for the soil to adjust to
both biological and chemical change processes. Many studies have concluded that
the farmer may face initial years lower yields when compared to conventional
farming. There is a time lag of 2-3 years for attaining competitive yields in organic
farming. Therefore, to encourage organic farming in the country, government should

229

provide input/conversion subsidies to organic growers who are facing these losses in
the initial years.
e. More R& D investments and technical support to farmers
Many developed countries (Europe, USA, Germany etc) are investing huge amounts
in organic agricultural research, extension and development activities. But, our
country investments on organic research and development were very low. There is
no specific extension and technical support division to address the organic farmers
problems. Thus, involvement of state agricultural universities and agricultural
departments is necessary for rapid expansion of organic farming in the country.
f. Cheap and quick certification process
Organic certification and costs involved in this process is another major problem for
growth of organic certified area in the country. Many of the organic farmers are
belongs to small and marginal category. The complex and high costs of certification
process is burden to them during conversion phase. Development of an innovative
cheap and simple certification process would help in bringing more cultivated area
under organic farming.
g. Availability of high quality certified organic inputs
Availability of quality organic inputs is crucial for success of any farming. Due to
absence of quality organic inputs in markets, the illiterate poor organic farmers are
using adulterated organic inputs. It is not only causing yield losses to farmers, but
also leading to loss of faith on organic farming. So, the need of the hour is
development of organic input marketing channels in the country. It will improve both
the productivity and efficiency of organic farming in the country.

******************

230

Chapter VIII
Summary and Conclusions
India had developed a vast and rich traditional agricultural knowledge since ancient
times and presently finding solutions to problems created by over use of
agrochemicals. Todays modern farming is not sustainable in consonance with
economics, ecology, equity, energy and socio-cultural dimensions. Indiscriminate
use of chemical fertilizers, weedicides and pesticides has resulted in various
environmental and health hazards along with socio-economic problems. Chemical
base farming system is no more beneficial as it requires high input and low return,
resulting migration of youth from rural area to urban area in search of other jobs.
Besides that cultivable area and forest land is shrinking day by day and become
biggest threat to habitat of animals and birds. Though agricultural production has
continued to increase, but productivity rate per unit area has started to decline.
The entire agricultural community is trying to find out an alternative sustainable
farming system, which is ecologically sound, economically and socially acceptable.
Sustainable

agriculture

is

unifying

concept,

which

considers

ecological,

environmental, philosophical, ethical and social impacts, balanced with cost


effectiveness. The answer to the problem probably lies in returning to our own roots.
Traditional agricultural practices, which are, based on natural and organic methods
of farming offer several effective, feasible and cost effective solutions to most of the
basic problems being faced in conventional farming system. There is also need to
conserve our traditional seed, some of which have drought resistant properties and
resistant to different pest and diseases. Many long term studies have reported that
soil under organic farming conditions had lower bulk density, higher water holding
capacity, higher microbial biomass carbon and nitrogen and higher soil respiration
activities compared to the conventional farms. This indicates that sufficiently higher
amounts of nutrients are made available to the crops due to enhanced microbial
activity under organic farming.

Organic agriculture is developing rapidly; its share of agricultural land and farms
continues to grow in many countries. According to the FiBL Survey, 2008; almost
30.4 million ha are managed organically by more than 7,00,000 farms (based on

2006 consolidated data). Oceania holds 42 per cent of the worlds organic land,
followed by Europe (24 per cent) and Latin America (16 per cent). On a global level,
the organic land area increased by almost 1.8 million ha compared to the previous
year, 2005. Global demand for organic products remains robust, with sales
increasing by over five billion US dollar a year.

India is bestowed with lot of potential to produce all varieties of organic products due
to its agro-climatic regions. In several parts of the country, the inherited tradition of
organic farming is an added advantage. This holds promise for the organic
producers to tap the market which is growing steadily in the domestic market related
to the export market. Currently, India ranks 33rd in terms of total land under organic
cultivation and 88th position for agriculture land under organic crops to total farming
area. The cultivated land under certification is around 2.8 million ha (2007-08, 1.9%
of GCA). This includes one million ha under cultivation and the rest is under forest
area (wild collection) (APEDA, 2010). India exported 86 items during 2007-08 with
the total volume of 37533 MT. The export realization was around 100.4 million US $
registering a 30 per cent growth over the previous year (APEDA, 2010).

With having such a due importance of organic farming in India, the important event in
the history of the modern nascent organic farming was the unveiling of the National
Programme for Organic Production (NPOP) in 2000. The subsequent accreditation
and certification program was started in 2001. The implementation of NPOP is
ensured by the formulation of the National Accredited Policy and Program (NAPP).
Later, the Department of Agriculture and Cooperation, Ministry of Agriculture has
also launched a central sectoral scheme entitled National Project on Organic
Farming (NPOF) during Xth five year plan. The main objective of the program are:
capacity building through service providers; financial support to different production
units engaged in production of bio-fertilizers, fruit and vegetable waste compost and
vermi-hatchery compost; human resource development through training on
certification and inspection, production technology etc. Development of model
organic farms, market development, developing domestic standards and creating
awareness were other components in the project. To implement the various
schemes, Ministry has prepared detailed guidelines for each component.

232

Setting up of organic input units with capital investment subsidy is one of major
component under NPOF for encouraging the organic inputs production since 2004.
Availability of quality organic inputs is critical for success of organic farming in India.
To promote organic farming in the country and to increase the agricultural
productivity while maintaining the soil health and environmental safety; organic input
units are being financed as credit-linked and back-ended subsidy through NABARD
and NCDC. These units will not only reduce the dependency on chemical fertilizers
but also efficiently convert the organic waste in to plant nutrient resources. Three
types of organic input production units namely; Fruit/vegetable waste units, Biofertilizer unit and Vermi-hatchery units are being supported @ 25 per cent of their
total project costs respectively. Around 455 vermi-hatchery units, 31 bio-fertilizer
units and 10 fruit and vegetable waste units were sanctioned across different states
by NABARD till May, 2009. But, NCDC has so far sanctioned only two bio-fertilizer
units in Maharashtra state.

At this juncture, it is very interesting to know what the present status of these units,
what the production and capacity utilization of each unit and suggestions for
enhancing capacity utilization etc. It is also very important to get the feed back from
promoters for further improving in the implementation of the scheme. However, very
little effort has been made so far to find out the performance of organic input units in
terms of its capacity utilization, cost of production and efficiency. Very few attempts
were also made till now to assess the economics and efficiency of organic farming in
India. Such analysis can provide valuable insights for undertaking appropriate
measures for faster expansion organic farming in the country. With this background,
broadly the present study has been planned to cover the following major issues:

1. To perform SWOT analysis of organic farming to articulate and refine policy


prospective and schemes
2. What is the present status of organic input production in India?
3. To evaluate the capacity utilization and efficiency of production units
sanctioned under NABARD and NCDC
4. What are the constraints in establishment of units and identification of
problems in marketing of organic inputs?
5. To examine constraints in procuring and using organic inputs by the farmers
233

6. What is economics and efficiency of organic farming in India?


7. What are the suggestions for effective implementation of project?

The study addresses the wide range of problems of conventional/modern farming


with the foundation of various research studies. It also covers the status of organic
farming in the World and India. This study presents a model based non-parametric
DEA approach for efficiency analysis of organic input units. Multiple regression
models are also used to estimate the drivers for efficiency in input units. The same
DEA approach is also used for estimating the efficiency between organic and
conventional farming systems. Similarly, the determinants for efficiency in organic
farming are also estimated.

8.1 Major findings and conclusions


A scan of the internal and external environment is an important part of the strategic
planning process. Organic farming has several major strengths than conventional
farming. The major strengths are: organic farming provides safety, healthy and tasty
organic food which lives up to its promise; high comparative advantage in organic
food production such as tea, spices, coffee, rice, wheat, cotton and vegetables etc;
low cost of production; high quality and improved nutrition of organic food; improves
the soil health; fetch premium prices for organic food; environmental sustainability;
high water-use-efficiency; favorable government initiatives like NPOP and NPOF for
promotion organic farming in the country; it preserves traditional varieties and biodiversity and increases self life of food etc. With all these strengths, India can
significantly play a major role in the international organic market.

Despite of many benefits in organic farming; why many farmers are not adopting it?
Organic farming has limited weaknesses when compared with conventional farming.
They are: initial productivity gaps in cultivation; it is intensive and needs high labor;
lack of established output markets; poor quality management in production and
processing; less incentives from government; limited research and development
investments on organic farming research; most of the organic markets are
buyers/consumer driven rather than supply/producer driven; lack of clear strategy for
development of organic faming in the country; disjointed producers, processors and
traders; availability of poor or adulterated quality organic inputs; large number of
234

small farms with weak organizational building etc. Until and unless we remove these
weaknesses in the system, the growth of organic farming is questionable!

The Indian organic farming has several opportunities to reap the untapped benefits
in the future. They include: big and growing organic domestic market potential;
growing purchasing power of consumers; nearly 70 per cent of gross cropped area
under rain fed with limited fertilizer application; growing health awareness of
consumers; can reduce heavy subsidies on food and fertilizers; control the nitrate
leaching and CO2 emissions and finally earn substantial export earnings. If India
could tap all these potentials avenues, the growth in agriculture shall easily surpass
the mile stone of 4 per cent per annum.

There are few possible threats for expansion of organic farming in India. The major
concerns are: high cost of organic food relative to conventional food; costly and
complex nature of organic certification process; lack of sufficient number of
infrastructure facilities and certification bodies; only export regulated organic market;
low awareness about usage of organic inputs; most of the Indian fields are
contiguous and problem of contamination and lastly interest towards introduction of
GM crops in to the country.

Recently, Government of India has taken policy initiatives like NPOP and NPOF for
promotion of organic farming in India. The review of various policies indicates that
some of the nagging policy issues will hinder the growth of organic farming in the
country. In India, APEDA is the highest controlling body for organic certification for
export. Till date there are no domestic standards for organic produce within India.
Although there is no system for monitoring the labeling of organic produce sold
within India, which particularly affects the retail market. Many researchers have
noted that the rapid increase in organic sales and certified acreage around the world
is not matched by an equal rate of growth in the number of organic farms as might
be expected. In an attempt to reduce the inequality of this trend, a number of
alternative methods to guarantee the organic integrity of products have to be
developed for small domestic producers (like PGS). An innovative cost effective
certification method uniform in standards across various countries need be
developed to connect numerous small and marginal farmers in the country.
235

India has enough potential for production of sufficient quantities of organic inputs.
Substantial capacities have been generated for production of different organic
manures through diverse state and central financial assistance schemes. As per
NCOF (2007-08), the total compost/vermi-compost production (includes rural, urban,
FYM and other sources) at all India was 3830.9 lakh tones and area covered by
these units was 1694.8 lakh ha. Similarly, the total green manure production in the
country was 133.5 lakh tones with 13.0 lakh ha area coverage. The total installed
capacity created for production of different bio-fertilizers in the country was 67162
tons. But, their actual production of different bio-fertilizers was 38932.6 tons. This
data clearly indicates that only 58 per cent of their capacity was utilized. However,
the growth in production of bio-fertilizers was quite significant when compared to
2004-05. The results also showed that the total production of bio-fertilizers was the
highest in case of Tamil Nadu followed by Karanataka, Andhra Pradesh and Kerala.
It also concludes that the awareness and usage of bio-fertilizers was higher in south
zone than other zones in India. Among different types of bio-fertilizers, the share of
Phosphorous Solubilizing Bacteria (PSB) production was higher. The status of biopesticides production in India is still in infant stage. The production is slowly gaining
momentum with the increased awareness of the farmers.

To assess the capacity utilization and efficiency of organic input units, a random
sample of 40 vermi-hatchery units were identified purposively from four states of
India. They are namely; Gujarat, Maharashtra, Punjab and U.P states. Similarly, two
fruit and vegetable waste units and four bio-fertilizer (3 NABARD + 1 NCDC) units
were also chosen for present study. The detailed cases on fruit and vegetable units
and bio-fertilizer units are presented in chapter 5.

The primary data was collected from 40 vermi-harchery units through a structured
questionnaire and the data was analyzed. The empirical results were summarized
and elaborately discussed in the Chapter 4. Overall, only three beneficiaries (7.5%)
out of 40 were having vermi-hatchery as their primary occupation. Most of the
sample

beneficiaries

expressed

agriculture

as

major

source

of

income.

Correspondingly, only 7.5 per cent sample dependent on vermi-hatchery as their


secondary source of income. These results suggest that most of the beneficiaries
are not taking up the vermi-hatchery units in a commercial way.
236

Around 97.5 per cent of the sample promoters are educated. The average size of
family was 6.3. The average no.of family members participating in the vermihatchery units were 1.5. Out of 40 units, only 22 units were functioning on the day of
visit. The main reasons for not functioning are: lack of demand for vermi-compost,
neither JMC visit nor subsidy release from NABARD, death of worms in high temps,
heavy rains and floods. The number of non-functioning units were maximum (100%)
in case Gujarat. NABARD has finished the conduct of JMC visits only in case of 70
per cent units. The remaining 30 per cent units are still waiting for JMC visits and
final subsidy. This indicates a huge delay in the process of subsidy release. Out of
the 28 units (70%) who completed JMC visits, only 19 units have received the final
subsidy amounts. Almost 32 per cent of units are waiting for release of final subsidy.
This was another bottleneck in the scheme where lot of time was consuming for
processing. A lone farmer in the entire sample was succeeded in obtaining the
license/certification for his product. Most of the promoters did not have any
awareness about these aspects.

On an average, the total financial out lay per unit was Rs.5.9 lakh. The outlay was
the highest in case of Maharashtra whereas it was the lowest in Punjab. The results
conclude that there is a huge gap between subsidy released till now (0.93 lakh) and
eligible subsidy (1.5 lakh) per unit. This gap is the highest in case of Gujarat (1.23
lakh) followed by U.P (0.27 lakh) and Punjab (0.25 lakh). Some of the main reasons
for this difference are: non-adoption of NABARD guidelines while establishing the
units and lot of delay in release of final subsidy after JMC team visited the unit.
Nearly, 78 per cent of the units were financed by commercial banks and the
remaining by cooperative banks.

Capacity utilization is a concept refers to the extent to which an enterprise actually


uses its installed productive capacity. The average installed capacity of the sample
units was 150 TPA. But, the mean production was around 76.2 TPA. The average
capacity utilization rate was only 50.8 per cent which indicates nearly half of its full
potential. Across different states, this value was the highest in Maharashtra (124.6%)
followed by U.P (70.0%), Punjab (22.0%) and Gujarat (16.1%). The main reasons for
low capacity utilization were lack of demand, poor production skills and insufficient
infrastructure. Based on promoters past experiences in vermi-compost, the data on
237

different productivity indicators were also collected. In general, the average working
days per annum were 332 days. The average recovery rate for entire sample was
42.7 per cent. The highest recovery rate was noticed in case of Maharashtra (52.5%)
followed by Gujarat (48.0), U.P (39.7%) and Punjab (33.3%). The average gestation
period per cycle for the entire sample was 48.8 days. The capacity utilization under
fruit and vegetable waste units and bio-fertilizer units showed a mix trends.

The state-wise detailed break-up of average cost of production, yield, and gross
returns of sample vermi-hatchery units were calculated. The cost of production of
vermi-compost per quintal in Gujarat was Rs.453. But, the same was Rs.218 per
quintal in case of Maharashtra state. The huge differences between these two
Western states were due to low productivity and capacity utilization in Gujarat.
Similarly, the costs of production per quintal in Punjab and U.P were Rs.433 and
Rs.324 respectively. Over all, the weighted average cost of production per quintal
was Rs.286. The price realization and net margins were Rs.506 and Rs.220 per
quintal respectively. The results indicates significant margin for promoters in this
venture. Among different cost components, the lion share was occupied by raw
materials followed by labor costs and seed stock. Between two regions, the cost of
production was slightly higher (42.8%) in Northern region when compared to
Western region. But, the price realization (49.4%) and net margin (58.4%) per quintal
of compost were higher for Northern region indicating higher demand in that region.

The estimated mean technical, allocative and economic efficiencies of sample vermihatchery units under DEA-CRS model were 63.7, 50.95 and 32.95 per cent
respectively. The results clearly indicate the low technical, allocative and economic
efficiency of sample units. Correspondingly, the mean values for DEA-VRS model
were 83.39, 59.42 and 50.24 per cent. The frequency distribution of technical
efficiency of sample units indicated that about 45 % of the sample units have more
than 90 per cent efficiency (under VRS) where as only 20 % of the sample units
were belonged to that category under CRS assumptions. In case of allocative
efficiency, 40.0 and 47.5 per cent samples fell under less 50 per cent category
respectively under VRS and CRS models. This concludes that majority of the sample
units are inefficient in allocating their inputs. The percentile distributions of sample
units fell below 50 per cent economic efficiency were 85.0 and 57.5 respectively
238

under CRS and VRS assumptions. It signifies that the organic inputs are suffering
from both technical inefficiency as well as allocative inefficiency. The mean scaleefficiency of the sample was 77.7 per cent. Among different states, the mean
technical efficiency under CRS model was the highest for Maharashtra (0.84)
followed by U.P (0.69), Gujarat (0.55) and Punjab (0.52). However when compared
between regions, slightly higher efficiency was observed in Northern region.

The socio-economic characters of promoters were regressed against efficiency


values to determine the drivers for efficiency in vermi-hatchery units. The results
concluded that the size of the unit, contribution of family labor have shown positive
relation with technical as well as scale-efficiencies. Participation in the training
programs is also enhancing technical efficiency. The age of the unit and subsidies
discouraged the scale-efficiency.

Out of the total sample, only six promoters have repaid entire borrowed loan amount
from bank. Nearly 85 per cent of the sample promoters are having unpaid loans with
bank. Almost, half of the sample promoters were categorized as regular payers by
the bank authorities. Overall, 67.5 per cent beneficiaries obtained preliminary training
in vermi-compost production. Majority of U.P promoters have undergone training
since NCOF is situated in the same state.

Majority of the sample promoters did not face any problem in establishment of vermihatchery units. Very few expressed some difficulties while establishing them. The
major problems are: non-availability of quality worms in the vicinity, lack of sufficient
raw materials, wild boar attacks on compost units, no proper guidance from
NABARD, heavy rains and delay in release of bank loan amounts etc.

Almost all vermi-hatchery units are following direct sales method rather than
depending upon any other intermediary. The quantity of total sales is very high in
direct sales. Nearly half of the sample promoters expressed that they are facing
severe marketing problems in marketing of their compost. The main reasons are lack
of demand, sales on credit basis, very low unit prices and absence of proper input
marketing channels. Lack of certification/licensing facilities are also discouraging

239

promoters to export their compost. Adulteration of organic inputs also exacerbates


the situation.

To elicit the information about the problems in procurement and usage of organic
inputs, about 15 organic farmers per state (a total of 60) were interviewed during
field visits. The sample organic farmers did not express any specific problems in
procurement of seeds. The problems in procurement of compost are lack of
organized marketing channels, absence of product standards and certifications.
Similarly, lack of distribution networks at block level, product standardization and
lack of supervision on adulterated products are the difficulties in case of bio-fertilizer
procurement. Farmers are looking for more awareness/training programs in case of
usage of bio-fertilizers. Most of sample farmers are quite satisfied with usage of
botanical pesticides for controlling the pests and diseases. But, the awareness and
usage of bio-pesticides like Trichoderma, Pseudomonas, Verticillium etc are limited
among sample farmers.

Due to very little accessible information on economics and efficiency of organic


farming in India, an attempt is made to assess it in different crops and states. The
results showed mixed response. In general, organic farming is a production system
which has low productivity levels, needs more labor, require low energy inputs and
has a changing net income levels along with selling prices. Overall, crop economics
results concluded that the unit cost of production is lower in organic farming in case
of cotton (both in Gujarat and Punjab) and Sugarcane (both in U.P and Maharashtra)
crops where as the same is lower in conventional farming for Paddy and Wheat
(both in Punjab and U.P) crops. The mixed results are in conformity with the findings
of Lampkin and Padel, 1994. The DEA efficiency analysis conducted on different
crops indicated that the efficiency levels are lower in organic farming when
compared to conventional farming, relative to their production frontiers. These results
conclude that there is ample scope for increasing the efficiency under organic farms.
The determinants of the efficiency in organic farming are education of the farmer and
formal participation in training programs.

The broad suggestions for promotion of organic input units are collected from the
respondents. The major issues are: prompt and timely conduct of JMC visits; quick
240

and timely disbursement of subsidies to promoters; inclusion of buffaloes, training on


vermi-compost production and insurance components in the going scheme; help in
easy licensing and certification of compost; supply of quality seed stock at cheaper
rates; intervention of NABARD/state Govt./ SAUs in marketing of compost;
encouragement of organic inputs usage by subsidies; creation of market demand by
promoting more awareness programs and finally further increase in subsidy upper
limit in the establishment of input units.

8.2 Policy implications


The Ministry of Agriculture should introduce favorable governmental policies and
strategies for the promotion of organic farming in India. These should include:

A single authority at national level with a well-defined role should be


responsible for the organic sector. An important role would be the
responsibility for regulating and supervising the organic sector at domestic
level, including any foreign bodies active in the country. With regard to export,
the national authority should act as counterpart to the authorities of the
importing countries and could thus strengthen the organic sector's export
potential.
The national authority should link with other institutes, NGOs, farmers
organizations and the private sector in designing strategies to support and
energize the organic sector, particularly in the fields of research, training,
extension, post-harvest handling and marketing. Through linking with the
different sectors, substantial experiences can be brought together and
organized in a strategic and coordinated way.
Current market demand is considerably higher than the supply, a situation
which creates potential opportunities for countries in the short and medium
term. So, India should use this opportunity timely to tap the national and
international markets by framing a well defined strategy on organic farming
sector at the national level. The development of international markets can
also stimulate domestic as well as regional market opportunities.
The quality organic input production (compost, bio-fertilizers and biopesticides) in the country should be further encouraged with latest

241

technologies and improved way of financial assistance so as to reduce the


high dependency on inorganic-fertilizers in a phase manner and to save our
domestic subsidies. It not only protects our soil health but also sustains the
environmental and natural resources.
The organic input units established under various schemes in the country
should be linked up with suitable market channels to improve their capacity
utilization or to make use of entire installed capacities. NABARD /state Agil
dept/ IFFCO should intervene in providing necessary support for their
marketing of organic inputs. Establishment of organic input marketing
channels is the need of the hour for expansion of organic farming in the
country.
The technical efficiency of organic input production should also be enhanced
by imparting more production skills to the promoters. The economic and scale
efficiency of the units should also be improved by providing more technical
guidance, quality seed stock and training programs.
Government should take a lead role in conduct of training and demonstration
programs for creating more awareness about use of different organic inputs
and their benefits. The state agricultural department and state agricultural
universities should also actively involve in these programs and should also
promote through their extension services. So that it will not only boost the
confidence of the farmers and but also increases the demand for organic
inputs. The demand should also be enhanced by subsidizing the usage of
organic inputs in the country.
Creation of Green markets or output market channels/linkages should be
developed for marketing of organic produce in the country. The promotion of
the organic sector in the country must involve development of complete
product chains including some value addition and export strategies.
Support structures should be introduced for small farmers group certification.
Local competencies for inspection and certification are increasing, which
leads to a strengthening of the local organic sector. Methodologies for group
certification are functioning technically, but need political recognition.
Competencies for inspection and certification are increasing in the country

242

and providing opportunities to localize the organic sector. This trend needs
more political strengthening vis -vis international trade.
A comprehensive program/scheme should be developed to assist the farmers
that who want to convert their lands from conventional to organic farming. It
includes some conversion or input subsidies, providing technical guidance
and finally certification of farm. It will dramatically expand the organic farming
in the country and ultimately sustains our food production.
Increase investments are needed on research and development activities in
organic agriculture and to scale-up the projects that have already proven
successful. The efficiency of organic farming should be improved by
disseminating improved methods of cultivation and packages of practices.
The Indian Council of Agricultural Research (ICAR) should take an initiative in
developing common course curricula on organic farming across different
universities in the country.
The establishment of a monthly information bulletin for farmers on local and
international prices for organic food items as well as inputs should be
developed. Similarly, establishment of systematic data/information about
various levels of organic product chains and market opportunities at
internationally, regionally and domestically are needs to be developed.
Regional information exchange on organic farming methods and research
results should be encouraged from international players like FAO, ESCAP,
the International Trade Centre and IFOAM etc to country level players and
finally to local farmers.
Finally, the most important task would be to ensure consistency of
government policies on organic sector. Through focusing of policies and
activities, the organic sector can be developed more quickly and more
effectively. Institutional barriers to the development of the organic sector are
considered greater than the technical and trade barriers. So, most relevant
institutions and partners should be prepared to competently involve in the
promotion of the organic sector in the country.

*********************

243

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*********************

258

Appendix
Table 1 TE, AE and EE of sample units under both CRS and VRS
Model of DEA analysis (%)

Unit no
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

DEA-CRS Model
TE
AE
EE
50.0
18.5
9.2
50.0
18.5
9.2
50.0
18.5
9.2
50.0
18.5
9.2
100.0
33.9
33.9
100.0
33.9
33.9
48.6
31.2
15.2
37.5
23.5
8.8
37.5
72.7
27.3
34.7
34.2
11.9
56.2
55.6
31.3
37.5
62.1
23.3
62.5
85.3
53.3
82.5
28.9
23.8
82.3
56.8
46.7
80.4
26.2
21.0
50.0
58.3
29.1
68.3
68.3
46.6
37.5
57.8
21.7
56.2
52.0
29.2
25.4
45.4
11.5
100.0
100.0
100.0
44.1
82.5
36.4
46.7
92.1
43.0
80.7
49.5
39.9
79.2
55.1
43.6
79.6
53.3
42.4
71.0
25.6
18.2
100.0
98.7
98.7
100.0
19.3
19.3
40.5
64.4
26.1
40.5
64.4
26.1
40.5
43.8
17.8
40.5
43.8
17.8
75.0
12.8
9.6
75.0
12.8
9.6
100.0
88.7
88.7
37.5
88.8
33.3
100.0
71.1
71.1
100.0
71.1
71.1

TE
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
44.6
100.0
100.0
73.9
83.9
83.4
80.5
72.4
69.6
83.0
83.5
77.5
100.0
63.6
53.4
81.6
80.6
80.8
75.4
100.0
100.0
46.4
46.4
45.8
45.8
81.8
81.8
100.0
100.0
100.0
100.0

DEA-VRS Model
AE
EE
38.2
38.2
38.2
38.2
38.2
38.2
38.2
38.2
36.8
36.8
36.8
36.8
75.7
75.7
89.4
89.4
98.0
98.0
30.8
13.8
88.0
88.0
68.6
68.6
81.4
60.2
29.3
24.6
64.8
54.0
26.4
21.3
87.7
63.5
67.8
47.2
69.6
57.8
63.9
53.4
39.8
30.9
100.0
100.0
87.4
55.6
80.9
43.2
51.5
42.0
59.0
47.6
55.8
45.1
30.5
23.0
100.0
100.0
24.8
24.8
65.8
30.5
65.8
30.5
43.8
20.1
43.8
20.1
16.3
13.4
16.3
13.4
100.0
100.0
62.9
62.9
82.3
82.3
82.3
82.3

SE
50.0
50.0
50.0
50.0
100.0
100.0
48.6
37.5
37.5
77.8
56.3
37.5
84.6
98.3
98.7
99.9
69.0
98.2
45.2
67.4
32.7
100.0
69.4
87.4
98.9
98.2
98.5
94.2
100.0
100.0
87.4
87.4
88.5
88.5
91.7
91.7
100.0
37.5
100.0
100.0

Photographs of vermi-hatchery units in Gujarat state

ii

Photographs of vermi-hatchery units in Maharashtra state

iii

Photographs of vermi-hatchery units in Punjab state

iv